Exhibit
10.21


 


LOAN AGREEMENT


 


Dated as of February 18, 2004


 


by and among


 


ARC COMMUNITIES 15 LLC and ARC15FLOV LLC


 


 


as Borrower,


 


 


and


 


MERRILL LYNCH MORTGAGE LENDING, INC.


 

















 


LIST OF SCHEDULES


 


SCHEDULES


 


	
  1

  	
   

  	
  –

  	
  Immediate Repairs Reserved for in Deferred
  Maintenance Escrow Account

  
	
  2

  	
   

  	
  –

  	
  Organizational Chart

  
	
  2.17

  	
   

  	
  –

  	
  Allocated Loan Amounts

  
	
  3

  	
   

  	
  –

  	
  Homesites as of the Closing Date

  
	
  4

  	
   

  	
  –

  	
  Exceptions to Representations and Warranties

  
	
  5

  	
   

  	
  –

  	
  Addresses for Notices

  
	
  6

  	
   

  	
  –

  	
  Work Reserve Funding Conditions for Deferred
  Maintenance Escrow Account

  
	
  7

  	
   

  	
  –

  	
  Leases with Affiliated Borrowers

  
	
  8

  	
   

  	
  –

  	
  Form of Quarterly Statement

  
	
  9

  	
   

  	
  –

  	
  Form of Monthly Statement

  
	
  10

  	
   

  	
  –

  	
  Form of Standard Lease as of the Closing Date

  
	
  11

  	
   

  	
  –

  	
  Crossed Borrowers and Crossed Loans

  



 


i

















 


LOAN AGREEMENT


 


THIS LOAN AGREEMENT, made as of February
    , 2004, is by and among ARC COMMUNITIES 15 LLC, a
Delaware limited liability company (“Borrower A”) and ARC15FLOV LLC, a
Delaware limited liability company (“Borrower B”), each having an
address at 600 Grant Street, Suite 900, Denver, Colorado 80203 Borrower A and
Borrower B are collectively and individually referred to herein as “Borrower”;
references herein to “Borrower”, unless otherwise specifically stated,
shall also mean and refer to each and every one of Borrower A and Borrower B,
jointly and severally, and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware
corporation, having an address at Four World Financial Center, 16th Floor, 250
Vesey Street, New York, New York  10080
(together with its successors and assigns, whether one or more, “Lender”).


 


RECITALS


 


WHEREAS, Borrower desires to obtain from Lender the
Loan in an amount equal to the Loan Amount (each as hereinafter defined) to,
with respect to certain of the Mortgaged Property (as hereinafter defined),
finance a portion of the acquisition cost of, and, with respect to other of the
Mortgaged Property, refinance existing debt at such Mortgaged Property and to
pay certain other fees and expenses;


 


WHEREAS, Lender is unwilling to make the Loan unless
Borrower executes and delivers this Agreement, the Note and the Loan Documents
(each as hereinafter defined) to which it is a party which shall establish the
terms and conditions of, and provide security for, the Loan; and


 


WHEREAS, Borrower has agreed to establish certain
accounts and to grant to Lender, a security interest therein upon the terms and
conditions of the security agreement set forth in Section
2.15.


 


NOW, THEREFORE, in consideration of the making of the
Loan by Lender and for other good and valuable consideration, the mutual
receipt and legal sufficiency of which are hereby acknowledged, the parties
hereby covenant, agree, represent and warrant as follows:


 


ARTICLE I.

CERTAIN DEFINITIONS


 


Section 1.1.            Definitions.  For all purposes of this Agreement:  (1) the capitalized terms defined in this Article 1 have the meanings assigned to them in
this Article 1 and include the plural as
well as the singular; (2) all accounting terms have the meanings assigned to them
in accordance with GAAP (as hereinafter defined); (3) the words “herein”,
“hereof”, and “hereunder” and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section, or other
subdivision; and (4) the following terms have the following meanings:


 


“Account Collateral”
has the meaning set forth in Section 2.15(a)
hereof.


 

















 


“Accounts” means
all accounts (as defined in the relevant UCC), now owned or hereafter acquired
by Borrower, and arising out of or in connection with, the operation of the
Mortgaged Property and all other accounts described in the Management Agreement
and all present and future accounts receivable, inventory accounts, chattel
paper, notes, insurance policies, Instruments, Documents or other rights to
payment and all forms of obligations owing at any time to Borrower thereunder,
whether now existing or hereafter created or otherwise acquired by or on behalf
of Borrower, and all Proceeds thereof and all liens, security interests,
guaranties, remedies, privileges and other rights pertaining thereto, and all
rights and remedies of any kind forming the subject matter of any of the
foregoing.


 


“Affiliate” of any
specified Person means any other Person (i) controlling or controlled by or
under common control with such specified Person; (ii) directly or indirectly
owning or holding ten percent (10%) or more of any equity interest in the first
Person; or (iii) ten percent (10%) or more of whose equity interests are
directly or indirectly owned or held by the first Person.  For the purposes of this definition,
“control” when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities or other beneficial interests, by
contract or otherwise; and the terms “controlling” and “controlled” have the
meanings correlative to the foregoing.


 


“Agreement” means
this Loan Agreement, together with the Schedules and Exhibits hereto, as the
same may from time to time hereafter be modified, supplemented or amended.


 


“Appraisal” means
each appraisal with respect to an individual Mortgaged Property prepared by an
Appraiser in accordance with the Uniform Standards of Professional Appraisal
Practice of the Appraisal Foundation, in compliance with the requirements of
Title 11 of the Financial Institution Reform, Recovery and Enforcement Act and
utilizing customary valuation methods such as the income, sales/market or cost
approaches.


 


“Appraiser” means a
nationally recognized MAI appraiser selected by Borrower and reasonably
approved by Lender.


 


“Approved Capital
Expenditures” has the meaning set forth in Section 2.13(a)(iii)
hereof.


 


“Assignment of Rents and
Leases” means, with respect to the Mortgaged Property, an Assignment
of Rents and Leases (and, if there are more than one, each and every one of
them), dated as of the Closing Date, granted by the Borrower owning such
Mortgaged Property to Lender with respect to the Leases, as same may thereafter
from time to time be supplemented, amended, modified or extended.


 


“Assumed Loan Debt Service”
means the greater of (i) the product of the Monthly Debt Service Payment Amount
multiplied by twelve (12) and (ii) the product of the Principal Indebtedness
multiplied by a market constant of 0.075.


 


2

















 


“Basic Carrying Costs”
means the following costs with respect to the Mortgaged Property:  (i) Impositions and (ii) insurance premiums
for policies of insurance required to be maintained by Borrower pursuant to
this Agreement or the other Loan Documents.


 


“Borrower” has the
meaning provided in the first paragraph of this Agreement.


 


“Business Day”
means any day other than a Saturday, a Sunday or a day on which commercial
banks in the State of New York are authorized or obligated by law, governmental
decree or executive order to be closed.


 


“Capital Improvement Costs”
means costs incurred or to be incurred in connection with replacements and
capital repairs made to the Mortgaged Property which would be capitalized in
accordance with GAAP.


 


“CERCLA” has the
meaning set forth in Section 5.1(d)(i) hereof.


 


“Chattel Paper”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under all “chattel paper” as defined in the UCC
(whether tangible chattel paper or electronic chattel paper).


 


“Closing Date”
means the date of the funding of the Loan.


 


“Code” means the
Internal Revenue Code of 1986, as amended, and as it may be further amended
from time to time, any successor statutes thereto, and applicable U.S.
Department of Treasury regulations issued pursuant thereto in temporary or
final form.


 


“Collateral”
means, collectively, the Land, Improvements, Leases, Rents, Personalty, and all
Proceeds, and (to the full extent assignable) Permits, which is or hereafter
may become subject to a Lien in favor Lender as security for the Loan (whether
pursuant to the Mortgages, any other Loan Document or otherwise), all whether
now owned or hereafter acquired and all other property which is or hereafter
may become subject to a Lien in favor Lender as security for the Loan and
including all property of any kind described as part of the Mortgaged Property
under any of the Mortgages.


 


“Collateral Security
Instrument” means any right, document or instrument, other than the
Mortgages, given as security for the Loan, including, without limitation and
the Contract Assignment.


 


“Collection Account”
has the meaning set forth in Section 2.12(a)
hereof.


 


“Collection Account Agreement”
means the Collection Account Agreement, dated as of the applicable date and
executed by Borrower, Lender and the Collection Account Bank, relating to the
Collection Account and the Reserve Accounts and any other accounts maintained
with the Collection Account Bank.


 


“Collection Account Bank”
means KeyBank, N.A., or any successor financial institution appointed by
Lender.


 


3

















 


“Condemnation Proceeds”
means, in the event of a Taking with respect to the Mortgaged Property, the
proceeds in respect of such Taking less any reasonable third party
out-of-pocket expenses incurred in prosecuting the claim for and otherwise
collecting such proceeds.


 


“Contest” has the
meaning set forth in Section 9.24(D)(1) hereof.


 


“Contingent Obligation”
means, as used in the definition of Other Borrowings, without duplication, any
obligation of Borrower guaranteeing any indebtedness, leases, dividends or
other obligations (“primary obligations”)
of any other Person (the “primary obligor”)
in any manner, whether directly or indirectly. 
Without limiting the generality of the foregoing, the term “Contingent Obligation” shall include any
obligation of Borrower:


 


(i)            to
purchase any such primary obligation or any property constituting direct or
indirect security therefor;


 


(ii)           to
advance or supply funds (x) for the purchase or payment of any such primary
obligation or (y) to maintain working capital or equity capital of the primary
obligor;


 


(iii)          to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation; or


 


(iv)          otherwise
to assure or hold harmless the holder of such primary obligation against loss
in respect thereof.


 


The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming Borrower is required to perform thereunder) as
determined by Lender in good faith.


 


“Contract Assignment”
means, with respect to the Mortgaged Property, the Assignment of Contracts,
Licenses, Permits, Agreements, Warranties and Approvals, dated as of the
Closing Date and executed by the Borrower owning the Mortgaged Property.


 


“Contracts” means
the Management Agreement and all other agreements to which Borrower is a party
or which are assigned to Borrower by the Manager in the Management Agreement
and which are executed in connection with the construction, operation and
management of the Mortgaged Property (including, without limitation, agreements
for the sale, lease or exchange of goods or other property and/or the
performance of services by it, in each case whether now in existence or
hereafter arising or acquired) as any such agreements have been or may be from
time to time amended, supplemented or otherwise modified.


 


“Co-terminus Crossed Loans” means Crossed Loans
with the same scheduled maturity as the Loan (i.e., five year loans are
co-terminus with each other, and ten year loans are coterminous with each
other).


 


4

















 


“Cross Guaranties” shall mean (i) each Guaranty
of the Loan, each dated as of the date hereof, executed by each of the Crossed
Borrowers, and (ii) each Guaranty, each dated as of the date hereof, of each of
the Crossed Loans, each executed by the Borrower.


 


“Cross Release Notice”
has the meaning set forth in Section 2.11(g).


 


“Cross Side Agreements” means each Side
Agreement, each dated as of the date hereof, each by and among Guarantor, one
or more Crossed Borrowers and Lender.


 


“Crossed Borrowers”
shall mean the mortgage loan borrowers (other than Borrower) listed on Schedule 11 attached hereto and made a part
hereof, subject to modification pursuant to Section
2.11(g) hereof.


 


“Crossed Indebtedness”
shall mean the Crossed Loans and all other “Indebtedness” as defined in each
Crossed Loan Agreement.


 


“Crossed Loans”
shall mean each of the mortgage loans (other than the Loan) listed on Schedule 11 attached hereto and made a part
hereof with respect to each Crossed Borrower, subject to modification pursuant
to Section 2.11(g) hereof.


 


“Crossed Loan Agreements”
shall mean each Loan Agreement, each dated as of the date hereof, between
Lender and each Crossed Borrower (i.e., a separate Loan Agreement for each
Crossed Loan and Crossed Borrower), each as amended, modified, supplemented or
restated from time to time, subject to modification pursuant to Section 2.11(g) hereof.


 


“Crossed Loan Default”
shall mean any “Event of Default” as defined in any Crossed Loan Agreement,
subject to modification pursuant to Section 2.11(g)
hereof.


 


“Crossed Loan Documents”
shall mean the “Loan Documents” as defined in each Crossed Loan Agreement for
each Crossed Loan, including without limitation the promissory note(s),
mortgage(s) and/or deed(s) of trust and Crossed Loan Agreement evidencing
and/or securing each Crossed Loan and each of the Cross Side Agreements and
each of the Crossed Guaranties of the Crossed Loans, subject to modification
pursuant to Section 2.11(g) hereof.


 


“Crossed Properties”
shall mean the “Mortgaged Property” securing each Crossed Loan, as defined in
each Crossed Loan Agreement for each Crossed Loan, subject to modification
pursuant to Section 2.11(g) hereof.


 


“Debt Service Coverage Ratio”
means, as of any date of calculation with respect to the Mortgaged Property,
the quotient expressed to two decimal places of the Underwritten Net Cash Flow
divided by the Assumed Loan Debt Service.


 


“Debt Service Coverage Test”
means, as of the Closing Date, a test which shall be satisfied if the
Underwritten Net Cash Flow is at least equal to the product of 1.25 and the
Assumed Loan Debt Service.


 


“Debt Service Reserve Account”
has the meaning set forth in Section 2.13(c).


 


5

















 


“Deed of Trust Trustee”
means the trustee under any Mortgage that constitutes a “deed of trust” under
applicable law.


 


“Default” means
the occurrence of any event which, but for the giving of notice or the passage
of time, or both, would be an Event of Default.


 


“Default
Rate” means the per annum interest rate equal to the lesser of (a)
5.0% per annum in excess of the rate otherwise applicable hereunder and (b) the
maximum rate allowable by applicable law.


 


“Defeasance” means
any of a Total Defeasance or a Partial Defeasance.


 


“Defeasance Collateral” shall mean Partial
Defeasance Collateral or Total Defeasance Collateral, as applicable.


 


“Defeasance Collateral
Account” has the meaning set forth in Section 2.7.


 


“Defeasance Date”
has the meaning set forth in Section 2.7.


 


“Defeased Note” has the meaning set forth in Section
2.7.


 


“Deferred Maintenance Escrow
Account” has the meaning set forth in Section
2.13(a).


 


“Deposit Account”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under all “deposit accounts” as defined in the
UCC.


 


“Disclosure
Certificate” has the meaning set forth in Section 5.1(w) hereof.


 


“Disclosure Documents” has the meaning set
forth in Section 5.1(w) hereof.


 


“Documents” means
all of Borrower’s right, title and interest, whether now owned or hereafter
acquired, in, to and under all “documents” as defined in the UCC (whether
negotiable or non-negotiable) or other receipts covering, evidencing or
representing goods.


 


“EO13224” has the
meaning set forth in Section 4.1(v) hereof.


 


“Eligible Account”
means a separate and identifiable account from all other funds held by the
holding institution, which account is either (i) an account maintained with a
federal or state chartered depository institution or trust company that (A)
satisfies the Rating Criteria and (B) insures the deposits made to such account
through the Federal Deposit Insurance Corporation, or (ii) a segregated trust
account maintained with the corporate trust department of a federal or state
chartered depository institution or trust company subject to regulations
regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulations Section 9.10(b) which, in either case, has corporate trust powers,
acting in its fiduciary capacity and in either case having combined capital and
surplus of at least $100,000,000 or otherwise acceptable to the Rating
Agencies.  An Eligible Account shall not
be evidenced by a certificate of deposit, passbook, other instrument or any
other physical indicia of ownership.  Following
a


 


6

















 


downgrade below
the Rating Criteria, withdrawal, qualification or suspension of such
institution’s rating, each account must at Lender’s request promptly (and in
any case within not more than thirty (30) calendar days) be moved to a
qualifying institution or to one or more segregated trust accounts in the trust
department of such institution, if permitted.


 


“Engineer” means
an Independent Engineer selected by Borrower and reasonably approved by Lender.


 


“Environmental Auditor”
means an Independent environmental auditor selected by Borrower and reasonably
approved by Lender.


 


“Environmental Claim”
means any notice, notification, request for information, claim, administrative,
regulatory or judicial action, suit, judgment, demand or other written
communication (whether written or oral) by any Person or Governmental Authority
alleging or asserting liability with respect to Borrower or any Mortgaged
Property (whether for damages, contribution, indemnification, cost recovery,
compensation, injunctive relief, investigatory, response, remedial or cleanup
costs, damages to natural resources, personal injuries, fines or penalties)
arising out of, based on or resulting from (i) the presence, Use or Release into
the environment of any Hazardous Substance at any location (whether or not
owned, managed or operated by Borrower) that affects Borrower or any Mortgaged
Property, (ii) any fact, circumstance, condition or occurrence forming the
basis of any violation, or alleged violation, of any Environmental Law or (iii)
any alleged injury or threat of injury to human health, safety or the
environment.


 


“Environmental Indemnity
Agreement” means the Environmental Indemnity Agreement dated as of
the Closing Date, from Borrower and the Guarantor, collectively, as indemnitor,
to Lender, as indemnitee, as the same may be amended, modified or supplemented
from time to time.


 


“Environmental Laws”
means any and all present and future federal, state or local laws, statutes, ordinances,
rules or regulations, or any judicial interpretation thereof, any judicial or
administrative orders, decrees or judgments thereunder issued by a Governmental
Authority, and any permits, approvals, licenses, registrations, filings and
authorizations, in each case as now or hereafter in effect, relating to the
environment, human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.


 


“Environmental Reports”
means each and every “Phase I Environmental Site Assessment” (and, if
applicable, “Phase II Environment Site Assessment”) as referred to in the ASTM
Standards on Environmental Site Assessments for Commercial Real Estate, E
1527-2000 and an asbestos survey, with respect to each Mortgaged Property,
prepared by one or more Environmental Auditors and delivered to Lender and any
amendments or supplements thereto delivered to Lender.


 


“Equipment” means
all of Borrower’s right, title and interest, whether now owned or hereafter
acquired, in, to and under (i) all “equipment” as defined in the UCC, and (ii)
all of the following (regardless of how classified under the UCC):  all building materials, construction


 


7

















 


materials, personal
property constituting furniture, fittings, appliances, apparatus, leasehold
improvements, machinery, devices, interior improvements, appurtenances,
equipment, plant, furnishings, fixtures, computers, electronic data processing
equipment, telecommunications equipment and other fixed assets now owned or
hereafter acquired by Borrower, and all Proceeds of (i) and (ii) as well as all
additions to, substitutions for, replacements of or accessions to any of the
items recited as aforesaid and all attachments, components, parts (including
spare parts) and accessories, whether installed thereon or affixed thereto, all
regardless of whether the same are located on any Mortgaged Property or are
located elsewhere (including, without limitation, in warehouses or other
storage facilities or in the possession of or on the premises of a bailee,
vendor or manufacturer) for purposes of manufacture, storage, fabrication or
transportation and all extensions and replacements to, and proceeds of, any of
the foregoing.


 


“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and the regulations promulgated thereunder. 
Section references to ERISA are to ERISA, as in effect at the date of
this Agreement and, as of the relevant date, any subsequent provisions of
ERISA, amendatory thereof, supplemental thereto or substituted therefor.


 


“ERISA Affiliate”
means any corporation or trade or business that is a member of any group of
organizations (i) described in Section 414(b) or (c) of the Code of which
Borrower is a member and (ii) solely for purposes of potential liability under
Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien
created under Section 302(f) of ERISA and Section 412(n) of the Code, described
in Section 414(m) or (o) of the Code of which Borrower is a member.


 


“Event of Default”
has the meaning set forth in Section 7.1
hereof.


 


“Excluded Borrower” has the meaning set forth
in Section 2.11(g) hereof.


 


“Excluded Guaranties” has the meaning set forth
in Section 2.11(g) hereof.


 


“Excluded Loan” has the meaning set forth in Section
2.11(g) hereof.


 


“Excluded Loan Agreement” has the meaning set
forth in Section 2.11(g) hereof.


 


“Excluded Loan Documents” has the meaning set
forth in Section 2.11(g) hereof.


 


“Excluded Property” has the meaning set forth
in Section 2.11(g) hereof.


 


“Excluded Side Agreement” has the meaning set
forth in Section 2.11(g) hereof.


 


“First Open Defeasance Date”
shall mean the earlier of (i) the Payment Date in March, 2008, or (ii) the date
that is two (2) years from the “start up day” (within the meaning of Section
860G(a)(9) of the IRC) of the REMIC Trust established in connection with the
final Securitization involving the Loan.


 


“First Open Prepayment Date”
is the Payment Date which is in the second month preceding the month in which
the Scheduled Maturity Date occurs.  For
example, if the


 


8

















 


Scheduled Maturity
Date is February 1, 2013, the First Open Prepayment Date is the Payment Date in
the month of December, 2012.


 


“First Payment Date”
has the meaning set forth in Section 2.5
hereof.


 


“Fiscal Year”
means the 12-month period ending on December 31st of each year (or, in the case
of the first fiscal year, such shorter period from the Closing Date through
such date) or such other fiscal year of Borrower as Borrower may select from
time to time with the prior consent of Lender.


 


“Fitch”
means Fitch, Inc. and its successors.


 


“Foreign Lender”
has the meaning set forth in Section 2.10(b) hereof.


 


“Fund” has the
meaning set forth in the definition of “Permitted Investments”.


 


“Funding Losses” has the meaning set forth in Section
2.5(e) hereof.


 


“GAAP” means
generally accepted accounting principles in the United States of America as of
the date of the applicable financial report, consistently applied.


 


“General Intangibles”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under (i) all “general intangibles” as defined
in the relevant UCC, now owned or hereafter acquired by Borrower and (ii) all
of the following (regardless of how characterized):  all agreements, covenants, restrictions or encumbrances affecting
the Mortgaged Property or any part thereof.


 


“Governmental
Authority” means any nation or government, any state, county,
municipality or other political subdivision thereof or any governmental body,
agency, authority, department or commission (including, without limitation, any
taxing authority) or any instrumentality or officer of any of the foregoing
(including, without limitation, any court or tribunal) exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any corporation, partnership or other entity directly or
indirectly owned or controlled by the foregoing.


 


“Gross Revenue”
means, for any period, the total dollar amount of all income and receipts
received by, or for the account of, Borrower in the ordinary course of business
with respect to the Mortgaged Property, but excluding Loss Proceeds (other than
the proceeds of business interruption insurance or the proceeds of a temporary
Taking in lieu of Rents which shall be included in Gross Revenue).


 


“Guarantor” means
Affordable Residential Communities Inc., a Maryland corporation, and Affordable
Residential Communities LP, a Delaware limited partnership, on a joint and
several basis.


 


“Guaranty of Nonrecourse
Obligations” means, with respect to the Loan, the Guaranty of
Nonrecourse Obligations guaranteeing the exceptions to the nonrecourse
provisions


 


9

















 


of the Loan
Documents for which liability is retained as described in Section 9.24 hereof from the Guarantor to Lender.


 


“Hazardous Substance”
means, collectively, (i) any petroleum or petroleum products or waste oils,
explosives, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls (“PCBs”), lead in
drinking water, lead-based paint and radon, (ii) any chemicals or other
materials or substances which are now or hereafter become defined as or
included in the definitions of “hazardous substances”, “hazardous wastes”,
“hazardous materials”, “extremely hazardous wastes”, “restricted hazardous
wastes”, “toxic substances”, “toxic pollutants”, “contaminants”, “pollutants”
or words of similar import under any Environmental Law, and (iii) any other
chemical or any other hazardous material or substance, exposure to which is now
or hereafter prohibited, limited or regulated under any Environmental Law.


 


“Homesites” means,
with respect to each Mortgaged Property, the manufactured housing sites located
thereon which are capable of being leased to a Person to accommodate a
manufactured or mobile home, the number of each of which is set forth on Schedule
3 attached hereto, as such number may be updated from time to time with the
mutual written agreement of Lender and Borrower.  Such schedule shall include a breakdown of manufactured housing
sites that are capable of accommodating single and double wide manufactured
homes, to the extent such information is reasonably available to the Borrower.


 


“Immediate Repairs” has the meaning set forth
in Section 2.13(a)(ii) hereof.


 


“Impositions”
means all taxes (including, without limitation, all real estate, ad valorem,
sales (including those imposed on lease rentals), use, single business, gross
receipts, value added, intangible transaction privilege, privilege or license
or similar taxes), assessments (including, without limitation, all assessments
for public improvements or benefits, whether or not commenced or completed
within the term of the Loan), ground rents, water, sewer or other rents and
charges, excises, levies, governmental fees (including, without limitation,
license, permit, inspection, authorization and similar fees), and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, foreseen or unforeseen, in respect of each Mortgaged Property
(including all interest and penalties thereon), accruing during or in respect
of the term hereof and which may be assessed against or imposed on or in
respect of or be a Lien upon (1) Borrower (including, without limitation, all
income, franchise, single business or other taxes imposed on Borrower for the
privilege of doing business in the jurisdiction in which each Mortgaged
Property, or any other collateral delivered or pledged to Lender in connection
with the Loan, is located) or Lender, or (2) any Mortgaged Property, or any
other collateral delivered or pledged to Lender in connection with the Loan, or
any part thereof or any Rents therefrom or any estate, right, title or interest
therein, or (3) any occupancy, operation, use or possession of, or sales from,
or activity conducted on, or in connection with any Mortgaged Property or the
leasing or use of any Mortgaged Property or any part thereof, or the
acquisition or financing of the acquisition of any Mortgaged Property by
Borrower.


 


“Improvements”
means all buildings, structures, fixtures and improvements now or hereafter
owned by Borrower of every nature whatsoever situated on any Land constituting
part of the Mortgaged Property (including, without limitation, all gas and
electric fixtures,


 


10

















 


radiators,
heaters, engines and machinery, boilers, ranges, elevators and motors, plumbing
and heating fixtures, carpeting and other floor coverings, water heaters,
awnings and storm sashes, and cleaning apparatus which are or shall be affixed
to the Land or said buildings, structures or improvements and including any
additions, enlargements, extensions, modifications, repairs or replacements
thereto).


 


“Indebtedness”
means the Principal Indebtedness, together with all other obligations and
liabilities due or to become due to Lender pursuant hereto, under the Note or
in accordance with any of the other Loan Documents, and all other amounts, sums
and expenses paid by or payable to Lender hereunder or pursuant to the Note or
any of the other Loan Documents.


 


“Indemnified Parties”
has the meaning set forth in Section 5.1(i).


 


“Independent”
means, when used with respect to any Person, a Person that (i) does not have
any direct financial interest or any material indirect financial interest in
Borrower or in any Affiliate of Borrower, (ii) is not connected with Borrower
or any Affiliate of Borrower as an officer, employee, trustee, partner,
director or person performing similar functions, and (iii) is not a member of
the immediate family of any Person described in clauses (i) or (ii).


 


“Independent Manager”
has the meaning set forth in Section 8.1(ee).


 


“Instruments”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under all “instruments” as defined in the UCC.


 


“Insurance Escrow Account”
has the meaning set forth in Section 2.13(b).


 


“Insurance Premiums”
has the meaning set forth in Section 5.1(x)(iii).


 


“Insurance Proceeds”
means, in the event of a casualty with respect to the Mortgaged Property, the
proceeds received under any insurance policy applicable thereto.


 


“Insurance Requirements”
means all material terms of any insurance policy required pursuant to this
Agreement or any of the Mortgages and all material regulations, rules and other
requirements of the National Board of Fire Underwriters or such other body
exercising similar functions applicable to or affecting the Mortgaged Property
or any part thereof or any use or condition thereof.


 


“Insured Casualty”
has the meaning set forth in Section 5.1(x)(iv)(B).


 


“Intellectual Property”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under the trademark licenses, trademarks, rights
in intellectual property, trade names, service marks and copyrights, copyright
licenses, patents, patent licenses or the license to use intellectual property
such as computer software owned or licensed by Borrower or other proprietary
business information relating to Borrower’s policies, procedures, manuals and
trade secrets.


 


“Interested Parties” has the meaning set forth
in Section 5.1(w) hereof.


 


11

















 


“Inventory” means
all of Borrower’s right, title and interest, whether now owned or hereafter
acquired, in, to and under all “inventory” as defined in the UCC and shall
include all Documents representing the same.


 


“Investment Property”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under all “investment property” as defined in
the UCC.


 


“IRS” has the meaning provided in Section
2.10(b) hereof.


 


“Land” means the
parcels of real estate described on Exhibit A
attached to the Mortgages and made a part hereof.


 


“Leases” means all
leases, subleases, lettings, occupancy agreements, tenancies and licenses by
Borrower as landlord of the Mortgaged Property or any part thereof now or
hereafter entered into, and all amendments, extensions, renewals and guarantees
thereof, and all security therefor.


 


“Leasing Commissions”
means leasing commissions incurred by Borrower in connection with leasing any
Mortgaged Property or any portion thereof (including renewals of existing
Leases).


 


“Legal Requirements”
means all governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions of Governmental Authorities (including,
without limitation, any of the foregoing relating to zoning, parking or land
use, any and all Environmental Laws and the Americans with Disabilities Act)
affecting Borrower or any Mortgaged Property or any part thereof or the construction,
use, alteration or operation thereof, or any part thereof (whether now or
hereafter enacted and in force), and all permits, licenses and authorizations
and regulations relating thereto, and all covenants, agreements, restrictions
and encumbrances contained in any instruments, at any time in force affecting
the Mortgaged Property or any part thereof or any utility services or septic
systems or other infrastructure serving any portion of the Mortgaged Property
(including, without limitation, any which may (i) require repairs,
modifications or alterations in or to the Mortgaged Property or any part
thereof or any utility services or septic systems or other infrastructure
serving any portion of the Mortgaged Property, or (ii) in any way limit the use
and enjoyment thereof).


 


“Lender” has the
meaning provided in the first paragraph of this Agreement.


 


“Letter of Credit Rights”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under all “letter of credit rights” as defined
in the UCC.


 


“Lien” means any
mortgage, deed of trust, lien (statutory or other), pledge, hypothecation,
assignment, security interest, or any other encumbrance or charge on or
affecting Borrower or any Mortgaged Property or any portion thereof, or any
interest therein (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and mechanic’s, materialmen’s and
other similar liens and encumbrances).


 


12

















 


“Loan” means the
loan made by Lender to Borrower pursuant to the terms of this Agreement.


 


“Loan Amount”
means an amount equal to $25,156,000.


 


“Loan Documents”
means this Agreement, the Note, the Contract Assignment, the Management
Agreement, the Manager’s Subordination, the Mortgages, the Assignments of Rents
and Leases, the Environmental Indemnity Agreement, the Guaranty of Non-Recourse
Obligations, the Side Agreement, the Crossed Guaranties of the Loan (subject to
modification pursuant to Section 2.11(g)
hereof) and all other agreements, instruments, certificates and documents
delivered by or on behalf of Borrower or an Affiliate of Borrower to evidence
or secure the Loan as same may be amended or modified from time to time.


 


“Local Collection Account”
and “Local Collection Account Bank” have
the meanings set forth in Section 2.12(a).


 


“Local Collection Account
Agreement” means with respect to the Local Collection Account, the
lockbox agreement, dated as of the applicable date and executed by Borrower,
Lender and the Local Collection Account Bank.


 


“Loss Proceeds”
means Condemnation Proceeds and/or Insurance Proceeds.


 


“Loss Proceeds Account” has the meaning set
forth in Section 2.12(f) hereof.


 


“Losses” has the
meaning set forth in Section 5.1(j).


 


“Management Agreement”
means with respect to any Mortgaged Property, the property management agreement
entered into between the Borrower owning such Mortgaged Property and the Manager
(and all of such property management agreements collectively), in such form as
may be reasonably approved by Lender, as such agreement(s) may be amended,
modified or supplemented in accordance with the terms and conditions hereof
from time to time, and any management agreement which may hereafter be entered
into with respect to any Mortgaged Property in accordance with the terms and
conditions hereof, as the same may be amended, modified or supplemented in
accordance with the terms and conditions hereof from time to time.


 


“Manager” means
ARC Management Services, Inc., a Delaware corporation, the current manager of
the Mortgaged Property under the current Management Agreement, or such other
Person as may hereafter be charged with management of any Mortgaged Property
pursuant to a Management Agreement entered into in accordance with the terms
and conditions hereof.


 


“Manager’s
Subordination” means, with respect to each Mortgaged Property,
initially each Manager’s Consent and Subordination of Management Agreement,
each executed by the Manager, the Borrower owning such Mortgaged Property and
Lender, dated as of the Closing Date, and in the event a successor or assignee
Manager is engaged at any Mortgaged Property, a subordination agreement
executed by Manager, the Borrower owning such Mortgaged Property and Lender in
form and substance satisfactory to Lender, whereby, among


 


13

















 


other things, the
Management Agreement is subordinated to the Indebtedness and to the Lien of the
Mortgages so long as the Loan remains outstanding.


 


“Master Homesite Lease Agreement” means, with
respect to each legal entity comprising the Borrower, the related Master
Homesite Lease Agreement, dated as of February    , 2004, by and
between ARC Housing, LLC (or with respect to any Mortgaged Property located in
Texas, ARC Housing TX LP, a Delaware limited partnership) and such entity
comprising the Borrower.


 


“Master Homesite Lease
Documentation” means, individually or collectively, as applicable, each and
every Master Homesite Lease Agreement.


 


“Master Lease Deposits”
means the security deposits under the Master Homesite Lease Documentation.


 


“Master Lease Deposit
Account” has the meaning set forth in Section
2.12(a)(i).


 


“Material Adverse Effect”
means a material adverse effect upon (i) the business operations, properties,
assets or condition (financial or otherwise) of Borrower, (ii) the ability of
Borrower to perform, or of Lender to enforce, any of the Loan Documents or
(iii) the aggregate value of the Mortgaged Property.


 


“Maturity Date”
means the earlier of (a) the Scheduled Maturity Date or (b) such earlier date
on which the entire Loan is required to be paid in full, by acceleration or
otherwise under this Agreement or any of the other Loan Documents.


 


“Maximum Rate” has
the meaning set forth in Section 2.5(i) hereof.


 


“Member” means ARC
Real Estate Holdings, LLC, a Delaware limited liability company.


 


“Moody’s” means
Moody’s Investors Services, Inc. and its successors.


 


“Money” means all
of Borrower’s right, title and interest, whether now owned or hereafter
acquired, in, to and under (i) all “money” as defined in the UCC and (ii) all
moneys, cash, or other items of legal tender generated from the use or
operation of the Mortgaged Property.


 


“Monthly Debt Service Payment”
has the meaning set forth in Section 2.5
hereof.


 


“Monthly Debt Service Payment
Amount” has the meaning set forth in Section
2.5 hereof.


 


“Mortgage” means,
with respect to the Mortgaged Property, a first priority Mortgage or Deed of
Trust (as applicable), Assignment of Leases and Rents, Security Agreement and
Fixture Filing, dated as of the Closing Date (and, if there are more than one,
each and every one of them), each granted by the Borrower owning such Mortgaged
Property to or for the benefit of Lender or Deed of Trust Trustee for the
benefit of Lender, respectively, with respect to


 


14

















 


the Mortgaged
Property as security for the Loan, as same may thereafter from time to time be
supplemented, amended, modified or extended by one or more agreements
supplemental thereto.


 


“Mortgaged Property”
means, at any time, individually or collectively, as applicable, the Land, the
Improvements, the Personalty, the Leases and the Rents, and all rights, titles,
interests and estates appurtenant thereto, encumbered by, and more particularly
described in, each of the Mortgages.


 


“Multiemployer Plan”
means a multiemployer plan defined as such in Section 3(37) of ERISA and which
is covered by Title IV of ERISA (i) to which contributions have been, or were
required to have been made by Borrower or any ERISA Affiliate within the past
six years or (ii) with respect to which Borrower could reasonably be expected
to incur liability.


 


“Net Proceeds”
means either (x) the purchase price (at foreclosure or otherwise) actually
received by Lender from a third party purchaser with respect to any Mortgaged
Property, as a result of the exercise by Lender of its rights, powers,
privileges and other remedies after the occurrence of an Event of Default or
(y) in the event that Lender (or its nominee) is the purchaser at foreclosure
of any Mortgaged Property, the higher of (i) the amount of Lender’s credit bid
or (ii) such amount as shall be determined in accordance with applicable law,
and in either case minus all reasonable third party, out of pocket costs and
expenses (including, without limitation, all attorneys’ fees and disbursements
and any brokerage fees, if applicable) incurred by Lender (and its nominee, if
applicable) in connection with the exercise of such remedies; provided, however,
that such costs and expenses shall not be deducted to the extent such amounts
previously have been added to the Indebtedness in accordance with the terms of
the Loan Documents or applicable law.


 


“Note” means one
or more promissory notes made by Borrower to Lender pursuant to this Agreement,
as such note may be modified, amended, supplemented, restated or extended, and
any replacement notes therefor.


 


“O&M Program”
has the meaning set forth in Section 5.1(d)(iv) hereof.


 


“OFAC” has the meaning set forth in Section
4.1(v) hereof.


 


“Officer’s Certificate”
means a certificate delivered to Lender by Borrower which is signed by an
authorized officer of Borrower.


 


“Operating Budget”
means, with respect to any Fiscal Year, the operating budget for the Mortgaged
Property reflecting Borrower’s projections of Gross Revenues and Property
Expenses for the Mortgaged Property for such Fiscal Year and on an annual and
monthly basis and submitted by Borrower to Lender in accordance with the
provisions of Section 5.1(r)(viii), which
Operating Budget shall include, as a component thereof, a Working Capital
Budget.


 


“Operating Expense Account”
has the meaning provided in Section 2.13(c).


 


“Operating Expenses”
means, for any period of calculation, all expenditures incurred and required to
be expensed under GAAP during such period in connection with the ownership,
operation, maintenance, repair and/or leasing of the Mortgaged Property,
including


 


15

















 


without limitation
(or duplication) Property Expenses. 
Notwithstanding the foregoing, Operating Expenses shall not include (a)
Capital Improvement Costs, (b) any extraordinary items (unless Lender and Borrower
approve of the inclusion of such items as Operating Expenses), (c)
depreciation, amortization and other non-cash charges or (d) any payments of
principal or interest on the Indebtedness or otherwise payable to the holder of
the Indebtedness.  Operating Expenses
shall be calculated on the accrual basis of accounting.


 


“Operating Revenues”
means, for any period, all regular ongoing income during such period from the
operation of the Mortgaged Property that, in accordance with GAAP, is included
in annual financial statements as revenue. 
Notwithstanding the foregoing, Operating Revenues shall not include (a)
any Loss Proceeds (other than business interruption proceeds or Condemnation
Proceeds in connection with a temporary Taking and, in either case, only to the
extent allocable to such period or other applicable reporting period), (b) any
proceeds resulting from the sale, exchange, transfer, financing or refinancing
of the Mortgaged Property, (c) any Rent attributable to a Lease more than one
month prior to the date on which the actual payment of Rent is required to be
made thereunder, (d) any interest income from any source, or (e) any other
extraordinary items as reasonably determined by Lender.  Operating Revenues shall be calculated on
the accrual basis of accounting.


 


“Organizational Agreements”
means, individually or collectively, (i) the certificate of formation and
operating agreement, (ii) the certificate of limited partnership and
partnership agreement, (iii) the certificate of incorporation and by-laws or
(iv) the trust agreement or other organizational documents, as applicable of
any Person, each as amended or restated from time to time.


 


“Origination Fee”
means 0.5% of the Loan Amount, payable to Lender on the Closing Date.


 


“Other Borrowings”
means, with respect to Borrower, without duplication (but not including the
Indebtedness or any interest rate protection agreement entered into pursuant
hereto) (i) all indebtedness of Borrower for borrowed money or for the deferred
purchase price of property or services, (ii) all indebtedness of Borrower
evidenced by a note, bond, debenture or similar instrument, (iii) the face
amount of all letters of credit issued for the account of Borrower and, without
duplication, all unreimbursed amounts drawn thereunder, and obligations
evidenced by bankers’ acceptances, (iv) all indebtedness of Borrower secured by
a Lien on any property owned by Borrower (whether or not such indebtedness has
been assumed), (v) all Contingent Obligations of Borrower, (vi) liabilities and
obligations for the payment of money relating to a capitalized lease obligation
or sale/leaseback obligation, (vii) liabilities and obligations representing
the balance deferred and unpaid of the purchase price of any property or
services, except those incurred in the ordinary course of Borrower’s business
that would constitute ordinarily a trade payable to trade creditors, and (viii)
all payment obligations of Borrower, if any, under any interest rate protection
agreement (including, without limitation, any interest rate swaps, caps,
floors, collars or similar agreements) and similar agreements.


 


“Other Crossed Loans” means Crossed Loans which
are not Coterminous Crossed Loans.


 


16

















 


“Partial
Defeasance” has the meaning set forth in Section 2.7.


 


“Partial
Defeasance Amount” has the meaning set forth in Section 2.17


 


“Partial Defeasance Collateral” shall mean U.S.
Obligations, which provide payments (i) on or prior to, but as close as
possible to, all Payment Dates and other scheduled payment dates, if any, under
the Defeased Note after the Defeasance Date and up to and including the
Scheduled Maturity Date, and (ii) in amounts equal to or greater than the
respective Scheduled Defeasance Payments related to such Payment Dates.


 


“Partial Release” has the meaning set forth in Section
2.17.


 


“Partial Release Property” has the meaning set
forth in Section 2.17.


 


“Payment Date” has
the meaning provided in Section 2.5(a).


 


“Payment Intangibles”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under all “payment intangibles” as defined in
the UCC.


 


“PBGC” means the
Pension Benefit Guaranty Corporation established under ERISA, or any successor
thereto.


 


“Permits” means
all licenses, permits, variances and certificates required by Legal
Requirements to be obtained by Borrower and used in connection with the
ownership, operation, use or occupancy of the Mortgaged Property (including,
without limitation, certificates of occupancy, building permits, business
licenses, state health department licenses, licenses to conduct business and
all such other permits, licenses and rights, obtained from any Governmental
Authority or private Person concerning ownership, operation, use or occupancy
of the Mortgaged Property).


 


“Permitted Encumbrances”
means, with respect to the Mortgaged Property, collectively, (i) the Lien
created by the related Mortgages, or any other Loan Documents of record
encumbering each Mortgaged Property, (ii) all Liens and other matters disclosed
on the Title Insurance Policy concerning each Mortgaged Property, (iii) Liens,
if any, for Impositions imposed by any Governmental Authority not yet
delinquent or being contested in good faith and by appropriate proceedings in
accordance with Section 5.1(b)(ii) hereof
and the related Mortgages, (iv) mechanic’s or materialmen’s Liens, if any,
being contested in good faith and by appropriate proceedings in accordance with
Section 5.1(b)(ii) hereof and the related
Mortgages, provided that no foreclosure has been commenced by the lien
claimant, (v) rights of existing and future tenants and residents as tenants
only pursuant to Leases, (vi) Liens for public utilities and (vii) claims
against Homesites incurred by tenants or other occupants of the Mortgaged
Property which claims, to the extent they affect the Mortgaged Property, are
contested in good faith and by appropriate proceedings in accordance with Section
5.1(b)(ii) hereof, which Liens and encumbrances referred to in clauses
(i)-(vii) above do not materially and adversely affect (1) the ability of
Borrower to pay in full the Principal Indebtedness and interest thereon in a
timely manner or (2) the use of any Mortgaged Property for the use currently
being made thereof, the operation of any Mortgaged Property as currently being
operated.


 


17

















 


“Permitted Investments”
means any one or more of the following obligations or securities acquired at a
purchase price of not greater than par:


 


(i)            obligations
of, or obligations fully guaranteed as to payment of principal and interest by,
the United States or any agency or instrumentality thereof provided such
obligations are backed by the full faith and credit of the United States of
America;


 


(ii)           obligations
of the following United States of America government sponsored agencies,
provided such obligations are backed by the full faith and credit of the United
States of America: Federal Home Loan Mortgage Corp. (debt obligations), the
Farm Credit System (consolidated systemwide bonds and notes), the Federal Home
Loan Banks (consolidated debt obligations), the Federal National Mortgage
Association (debt obligations), the Financing Corp. (debt obligations), and the
Resolution Funding Corp. (debt obligations);


 


(iii)          federal funds, unsecured certificates of
deposit, time deposits, bankers’ acceptances and repurchase agreements with
maturities of not more than 365 days of any bank, the short-term obligations of
which are rated in the highest short-term rating category by the Rating
Agencies;


 


(iv)          certificates
of deposit, time deposits, demand deposits or banker’s acceptances issued by
any depository institution or trust company incorporated under the laws of the
United States or of any state thereof and subject to supervision and
examination by federal and/or state banking authorities, the short-term
obligations of which are rated in the highest short-term rating category by the
Rating Agencies, which investments are fully insured by the Federal Deposit
Insurance Corp.;


 


(v)           debt
obligations with maturities of not more than 365 days and rated by the Rating
Agencies in its highest long-term unsecured rating category;


 


(vi)          commercial
paper (including both non-interest-bearing discount obligations and
interest-bearing obligations payable on demand or on a specified date not more
than one year after the date of issuance thereof) with maturities of not more
than 270 days and that is rated by the Rating Agencies in their highest
short-term unsecured debt rating; and


 


(vii)         any other demand, money market or time
deposit, demand obligation or any other obligation, security or investment,
which Lender shall have approved in writing and for which Borrower shall have
delivered a Rating Confirmation;


 


provided,
however, that (A) the investments described
in clauses (i) through (vii) above must have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (B) if such investments
have a variable rate of interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must move proportionately
with that index, (C) such investments must not be subject to liquidation prior
to their maturity or have an “r” highlighter affixed to its rating by S&P,
and (D) such investments must not be subject to liquidation prior to their
maturity; and provided, further, that, in the judgment of Lender, such
instrument continues to qualify as a “cash flow investment” pursuant to Code
Section 860G(a)(6)


 


18

















 


earning a passive return in the nature of interest and
that no instrument or security shall be a Permitted Investment if such
instrument or security evidences (x) a right to receive only interest payments
or (y) the right to receive principal and interest payments derived from an
underlying investment at a yield to maturity in excess of 120% of the yield to
maturity at par of such underlying investment.


 


“Permitted Transfer”
means any conveyance, assignment, sale or other disposition (and not a
mortgaging, encumbrance, pledging, hypothecation, or granting of a security
interest) (directly or indirectly) of not more than 49% of the voting and
beneficial ownership interests in any legal entity comprising Borrower or the
Member following which Affordable Residential Communities LP (i) owns (directly
or indirectly) 51% or more of such voting and beneficial ownership interests in
each legal entity comprising Borrower and (ii) controls the operations and
management of Borrower; provided, (a) that
under no circumstance shall any Transfer be a Permitted Transfer hereunder
unless after giving effect to such Transfer each Borrower and each Crossed
Borrower is under 100% common ownership (direct and indirect) and control, and (b)
that any such Transfer referred to above which takes the form of a Transfer of
the equity ownership interests in any legal entity comprising Borrower or the
Member to a transferee which (collectively amongst itself and its Affiliates
that own such equity ownership interests) acquires (directly or indirectly) a
greater than 49% ownership interest in such legal entity comprising Borrower or
the Member, or which acquires control over the operations and management of
such legal entity comprising Borrower or the Member, shall not be permitted
unless, in addition to satisfaction of the conditions set forth in clauses (i)
and (ii) of this definition above, Borrower delivers to Lender (1) a
substantive non-consolidation opinion in form and substance reasonably acceptable
to Lender and the Rating Agencies, if required by Lender or the Rating Agencies
and (2) a Rating Confirmation.


 


“Person” means any
individual, corporation, limited liability company, partnership, joint venture,
estate, trust, unincorporated association, any federal, state, county or
municipal government or any bureau, department or agency thereof and any
fiduciary acting in such capacity on behalf of any of the foregoing.


 


“Personalty” means
all right, title and interest of Borrower in and to all Equipment, Inventory,
Accounts, General Intangibles, Instruments, Investment Property, Receivables,
Pledged Accounts, Deposit Accounts, Contracts and Intellectual Property and all
other personal property as defined in the relevant UCC, now owned or hereafter
acquired by Borrower and now or hereafter affixed to, placed upon, used in
connection with, arising from or otherwise related to the Mortgaged Property or
which may be used in or relating to the planning, development, financing or
operation of such Mortgaged Property, including, without limitation, furniture,
furnishings, equipment, machinery, money, insurance proceeds, accounts,
contract rights, trademarks, goodwill, chattel paper, documents, trade names,
licenses and/or franchise agreements, rights of Borrower under leases of
fixtures or other personal property or equipment, inventory, all refundable,
returnable or reimbursable fees, deposits or other funds or evidences of credit
or indebtedness deposited by or on behalf of Borrower with any governmental
authorities, boards, corporations, providers of utility services, public or
private, including specifically, but without limitation, all refundable,
returnable or reimbursable tap fees, utility deposits, commitment fees and
development costs.


 


19

















 


“Plan” means an
employee benefit or other plan, other than a Multiemployer Plan, that is
covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the
Code, and (i) was established or maintained by Borrower or any ERISA Affiliate
during the five year period ended prior to the date of this Agreement or to
which Borrower or any ERISA Affiliate makes, is obligated to make or has,
within the five year period ended prior to the date of this Agreement, been required
to make contributions or (ii) with respect to which Borrower could reasonably
be expected to incur liability.


 


“Pledged Accounts”
means the Local Collection Account(s), the Collection Account, the Reserve
Accounts, the Loss Proceeds Account, the Security Deposit Account, the Master
Lease Deposit Account, any additional accounts now or hereafter maintained by
or on behalf of Borrower hereunder and any sub-accounts of any of the foregoing
and any successor accounts to any of the foregoing.


 


“Policies” has the
meaning provided in Section 5.1(x)(iii).


 


“Pre-existing Condition” has the meaning set
forth in Section 5.1(x)(iii)(B) hereof.


 


“Principal Indebtedness”
means the principal amount of the Loan outstanding as adjusted by each increase
(including advances made by Lender to protect the Collateral), or decrease in
such principal amount of the Loan outstanding, whether as a result of
prepayment or otherwise, from time to time.


 


“Prepaid Rent Account”
has the meaning provided in 2.13(d).


 


“Prepayment Consideration”
has the meaning set forth in Section 2.6(c) hereof.


 


“Proceeds” shall
have the meaning given in the UCC and, in any event, shall include, without
limitation, all of Borrower’s right, title and interest in and to proceeds,
product, offspring, rents, profits or receipts, in whatever form, arising from
the Collateral.


 


“Prohibited Person” has the meaning set forth
in Section 4.1(v) hereof.


 


“Property Expenses”
means, with respect to the Mortgaged Property, the following costs and expenses
but only, in the case of costs and expenses in respect of goods and services,
to the extent that they (x) are paid to Persons who are generally in the
business of providing such goods and services, (y) are customary for the types
of goods or services provided in the geographical area in which such goods or
services are provided and (z) do not constitute Capital Improvement Costs:


 


(i)            Impositions;


 


(ii)           insurance
premiums for policies of insurance required to be maintained by Borrower
pursuant to this Agreement or the other Loan Documents or otherwise maintained
by Borrower or an Affiliate of Borrower on behalf of Borrower in the ordinary
course of business with respect to the Mortgaged Property;


 


20

















 


(iii)          the cost of all electricity, oil, gas, water,
steam, heat, ventilation, air conditioning and any other energy, utility or
similar item and overtime services with respect to the Mortgaged Property;


 


(iv)          payments
required under service contracts for any services or items used at the
Mortgaged Property or otherwise used in the operation of the Mortgaged Property
(including, without limitation, service contracts for heating, ventilation and
air conditioning systems, elevators, landscape maintenance, pest extermination,
security, furniture, trash removal, answering service and credit checks);


 


(v)           wages,
benefits, payroll taxes, uniforms, the cost of cleaning supplies and all
related expenses for on-site personnel directly involved in the day-to-day
operation of the Mortgaged Property (including, without limitation, full time,
part time, or seasonal employees, allocated between a number of properties and
general repair, maintenance and security employees), whether hired by Borrower,
Manager or any other Person;


 


(vi)          costs
required in connection with the enforcement of any Lease (including, without
limitation, reasonable attorneys’ fees, charges for lock changes and storage
and moving expenses for furniture, fixtures and equipment);


 


(vii)         advertising and rent-up expenses (including,
without limitation, leasing services, tenant rent concessions, promotions for
existing and prospective tenants, banners and signs);


 


(viii)        out-of-pocket cleaning, maintenance and repair
expenses;


 


(ix)           any
expense the total cost of which is passed through to tenants pursuant to
executed Leases;


 


(x)            legal,
accounting, auditing and other professional fees and expenses incurred in
connection with the ownership, leasing and operation of the Mortgaged Property
(including, without limitation, collection costs and expenses);


 


(xi)           permits,
licenses and registration fees and costs;


 


(xii)          any expense necessary in order to prevent a
breach under a Lease;


 


(xiii)         any expense necessary in order to prevent or
cure a violation of any Legal Requirement (including Environmental Law),
regulation, code or ordinance;


 


(xiv)        costs and expenses of any appraisals,
valuations, surveys, inspections, environmental assessments or market studies,
zoning reports;


 


(xv)         costs
and expenses of security and security systems provided to and/or installed and
maintained with respect to the Mortgaged Property;


 


(xvi)        costs of title, UCC, litigation and other
searches and costs of maintaining the Lien of the Mortgages thereon and the
security interest in any related Collateral;


 


21

















 


(xvii)       fees and expenses of property managers
contracted with by Borrower to perform management, administrative, payroll or
other services in connection with the operation of the Mortgaged Property
(including, without limitation, the fees and expenses owed to Manager under any
Management Agreement which the Lender has approved in accordance with this
Agreement);


 


(xviii)      any other costs and expenses contemplated by the
Operating Budget and customarily incurred in connection with operating
properties similar in type and character to the Mortgaged Property; and


 


(xix)         any other category of property expense that is
customary for a property of the type and size as the Mortgaged Property and is
reasonably approved by Lender.


 


“Quarterly Statement”
has the meaning provided in Section 2.12(e).


 


“Rating Agencies”
means at least two of Fitch, Moody’s and S&P (or, if a Secondary Market
Transaction has occurred in which Securities have been issued, each of the
foregoing that rated such Securities).


 


“Rating Criteria”
with respect to any Person, means that (i) the short-term unsecured debt
obligations of such Person are rated at least “A-1” by S&P, “P-1” by
Moody’s and “F-1” by Fitch, if deposits are held by such Person for a period of
less than one month, or (ii) the long-term unsecured debt obligations of such
Person are rated at least “AA-” by S&P, “Aa3” by Moody’s and “AA-” by
Fitch, if deposits are held by such Person for a period of one month or more.


 


“Rating Confirmation”
with respect to any transaction, matter or action in question, means: (i) if
all or any portion of the Loan, by itself or together with other loans, has
been the subject of a Secondary Market Transaction, the written confirmation of
the Rating Agencies that such transaction, matter or action shall not, in and
of itself, result in the downgrading, withdrawal or qualification of the
then-current ratings assigned to any of the Securities issued in connection
with a Secondary Market Transaction; and (ii) if any portion of the Loan has
not been the subject of a Secondary Market Transaction, Lender shall have
determined in its reasonable discretion (taking into consideration such factors
as Lender may determine, including the attributes of the loan pool in which any
portion of the Loan reasonably be expected to be securitized) that no rating
for any Securities that would be issued in connection with a Secondary Market
Transaction involving any of such portion of the Loan would be downgraded,
qualified, or withheld by reason of such transaction, matter or action.


 


“Real Estate Taxes Escrow
Account” has the meaning provided in Section
2.13(b).


 


“Receivables”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under (i) 
any Accounts, Chattel Paper, Instruments, Payment Intangibles, Letter of
Credit Rights, Documents, insurance policies, drafts, bills of exchange, trade
acceptances, notes or other indebtedness owing to Borrower from whatever source
arising, (ii) to the extent not otherwise included above, (a) all income,
Rents, issues, profits, revenues, deposits and other benefits from the
Mortgaged Property and (b) all receivables


 


22

















 


and other
obligations now existing or hereafter arising, or created out of the sale,
lease, sublease, license, concession or other grant of the right of the use and
occupancy of property or rendering of services by Borrower or any operator or
manager of the Mortgaged Property or other commercial space located at the
Mortgaged Property or acquired from others (including, without limiting the
generality of the foregoing, from rental of space, halls, stores, and offices,
and deposits securing reservations of such space, exhibit or sales space of
every kind, license, lease, sublease and concession fees and rentals, wholesale
and retail sales of merchandise, service charges, vending machine sales and
proceeds, if any, from business interruption or other loss of income insurance,  (iii) all of the books and records (whether
in tangible, electronic or other form) now or hereafter maintained by or on
behalf of Borrower in connection with the operation of the Mortgaged Property
or in connection with any of the foregoing and (iv) all Supporting Obligations
and all liens and security interests securing any of the foregoing and all
other rights, privileges and remedies relating to any of the foregoing.


 


“Release” means
any active or passive release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment (including, without limitation, the movement of
Hazardous Substances through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata).


 


“Remedial Work”
has the meaning set forth in Section 5.1(d)(i).


 


“Rents” means all
income, rents (including base rent), issues, profits, revenues (including all
oil and gas or other mineral royalties and bonuses), deposits (other than
utility and security deposits) and other benefits from the Mortgaged Property.


 


“Replacement Reserve Account”
has the meaning set forth in Section 2.13(a).


 


“Replacement Reserve
Deposit Amount” means an amount equal to one-twelfth (1/12th) of
the product of $50.00 and the number of Homesites at the Mortgaged Property; provided,
that, notwithstanding the foregoing, in the event the Lender determines in its
reasonable discretion that an increase in such amount is necessary to maintain
proper operation of the Mortgaged Properties, then upon not less than thirty
(30) days prior written notice to the Borrower, the Lender may increase the
aforementioned amount based upon its reassessment of the amount necessary for
Capital Improvement Costs from time to time.


 


“Replacement Reserve
Threshold Amount” means the product of $50.00 (or such higher amount as the
Lender shall reasonably determine pursuant to the proviso to the definition of
Replacement Reserve Deposit Amount) and the number of Homesites at the
Mortgaged Property.


 


“Reserve Account(s)”
means the Deferred Maintenance Escrow Account, the Replacement Reserve Account,
the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the
Operating Expense Account, Working Capital Reserve Account, the Debt Service
Reserve Account and the Prepaid Rent Account, collectively, and any successor
accounts to any of the foregoing.


 


“Restoration” has the meaning set forth in Section
5.1(x)(iii)(B).


 


23

















 


“Scheduled
Defeasance Payments” shall mean scheduled payments of interest and
principal under the Note in the case of a Total Defeasance and under the
Defeased Note in the case of a Partial Defeasance for all Payment Dates
occurring after the Defeasance Date and up to and including the Scheduled
Maturity Date (including, in the case of a Total Defeasance, the outstanding
principal balance of the Loan as of the Scheduled Maturity Date and, in the
case of a Partial Defeasance, the outstanding principal balance of the Defeased
Note as of the Scheduled Maturity Date), and all payments required after the
Defeasance Date, if any, under the Loan Documents for servicing fees, and other
similar charges.


 


“Scheduled Maturity Date”
mean March 1, 2009.


 


“S&P” shall
mean Standard & Poor’s Rating Services, a division of The McGraw-Hill
Companies, Inc and its successors.


 


“Secondary Market Transaction”
has the meaning set forth in Section 5.1(w).


 


“Security Agreement”
shall mean a security agreement in form and substance that would be
satisfactory to a prudent lender pursuant to which Borrower grants Lender a
perfected, first priority security interest in the Defeasance Collateral
Account and the Defeasance Collateral.


 


“Securities” means
mortgage pass-through certificates or other securities issued in a Secondary
Market Transaction and evidencing a beneficial interest in or secured in whole
or in part by the Loan in a rated or unrated public offering or private
placement.


 


“Security Deposit Account”
has the meaning set forth in Section 2.12(a)(i).


 


“Side Agreement” means that certain Side
Agreement dated as of the date hereof, by and among Guarantor, Borrower and
Lender.


 


“Single Member”
has the meaning set forth in Section 8.1(ee).


 


“Supporting Obligations”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under (i) all “supporting obligations” as
defined in the UCC and (ii) any other guarantee, letter of credit, secondary
obligation, right or privilege that supports or pertains to any of the
Mortgaged Property.


 


“Survey” means a
certified ALTA/ACSM survey of each Mortgaged Property prepared by a registered
Independent surveyor, containing the form of survey or certification provided
to Borrower by Lender and in form and content reasonably satisfactory to Lender
and the company issuing the Title Insurance Policy for each Mortgaged Property.


 


“Taking” means a
taking or voluntary conveyance during the term hereof of all or part of any
Mortgaged Property, or any interest therein or right accruing thereto or use thereof,
as the result of, or in settlement of, any condemnation or other eminent domain
proceeding by any Governmental Authority affecting the Mortgaged Property or
any portion thereof whether or not the same shall have actually been commenced.


 


24

















 


“Tax Liabilities” has the meaning set forth in Section
2.10(a) hereof.


 


“Title Insurance Policy”
means a mortgagee’s title insurance policy or policies (i) issued by one or
more title companies reasonably satisfactory to Lender which policy or policies
shall (unless Lender otherwise requires or consents) be in form ALTA 1992,
where available (with waiver of arbitration provisions), naming Lender as the
insured party, (ii) insuring the Mortgages as being a first and prior lien upon
the Mortgaged Property, (iii) showing no encumbrances against any Mortgaged
Property (whether junior or superior to the Mortgages) which are not reasonably
acceptable to Lender other than Permitted Encumbrances, (iv) in an amount
reasonably satisfactory to Lender (it being understood and agreed that because
multiple Mortgaged Properties secure the Loan, a reasonable requirement shall
be deemed to include requiring title insurance for a Mortgaged Property in the
amount of the allocated loan amount (as reasonably determined by Lender) for
such Mortgaged Property if a tie-in endorsement is available in the State where
such Mortgaged Property is located or 125% of the appraised value of a
Mortgaged Property if a tie-in endorsement is not available in the State where
such Mortgaged Property is located or such Mortgaged Property cannot be tied
together with other Mortgaged Properties for any reason), and (v) otherwise in
form and content reasonably acceptable to Lender.  Such Title Insurance Policy shall include the following
endorsements or affirmative coverages in form and substance reasonably
acceptable to Lender, to the extent available in the jurisdiction in which the
Land is located: variable rate endorsement; survey endorsement; comprehensive
endorsement; zoning (ALTA 3.1 with parking added) endorsement; first loss, last
dollar and tie-in endorsement; access coverage; separate tax parcel coverage;
contiguity (if applicable) coverage; and such other endorsements as Lender
shall reasonably require with respect to a particular Mortgaged Property in
order to provide insurance against specific risks identified by Lender in
connection with the Mortgaged Property.


 


“Total
Defeasance” shall have the meaning set forth in Section 2.3.


 


“Total Defeasance Collateral” shall mean U.S.
Obligations, which provide payments (i) on or prior to, but as close as
possible to, all Payment Dates and other scheduled payment dates, if any, under
the Note after the Defeasance Date and up to and including the Scheduled Maturity
Date, and (ii) in amounts equal to or greater than the respective
Scheduled Defeasance Payments related to such Payment Dates.


 


“Transaction”
means the transactions contemplated by the Loan Documents.


 


“Transaction Costs”
means all costs and expenses paid or payable by Borrower relating to the
Transaction (including, without limitation, appraisal fees, legal fees and
accounting fees and the costs and expenses described in Section
9.23).


 


“Transfer” means
the conveyance, assignment, sale, mortgaging, encumbrance (other than a
Permitted Encumbrance), pledging, hypothecation, granting of a security
interest in, granting of options with respect to, or other disposition of
(directly or indirectly, voluntarily or involuntarily, by operation of law or
otherwise, and whether or not for consideration or of record) all or any
portion of any direct or indirect 
(irrespective of the number of tiers of ownership) legal or beneficial
interest (a) in all or any portion of the Mortgaged Property; or (b) any stock,
partnership interests, membership interests or other ownership interests in
Borrower or


 


25

















 


the Member or the
constituent entities directly or indirectly (irrespective of the number of
tiers of ownership) owning any such stock, partnership interests, membership
interests or other ownership interests. 
A Transfer shall also include, without limitation to the foregoing, the
following: an installment sales agreement wherein Borrower agrees to sell the
Mortgaged Property or any part thereof or any interest therein for a price to
be paid in installments; an agreement by Borrower leasing all or a substantial
part of the Mortgaged Property to one or more Persons pursuant to a single or
related transactions, or a sale, assignment or other transfer of, or the grant
of a security interest in, Borrower’s right, title and interest in and to any
Leases or any Rent; execution or consent by Borrower of any instrument
subjecting the Mortgaged Property to a condominium regime or transferring
ownership to a cooperative corporation; and any change of control of Borrower
or the Member.


 


“Treasury Rate”
means, on the date on which such rate is calculated, the yield on the ten year
“on the run” U.S. Treasury issue (primary issue) with such yield being based on
the bid price for such issue as reasonably determined by Lender.


 


“UCC” means with
respect to any Collateral, the Uniform Commercial Code as in effect from time
to time in the State of New York; provided,
that if by reason of mandatory provisions of law, the perfection or the effect
of perfection or non-perfection or priority of the security interest in any
item or portion of the Collateral is governed by the Uniform Commercial Code as
in effect in a jurisdiction other than the State of New York, “UCC” shall mean
the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection or priority. 
Wherever this agreement refers to terms as defined in the UCC, if such
term is defined in more than one Article of the UCC, the definition in Article
9 of the UCC shall control.


 


“UCC Searches” has
the meaning set forth in Section 3.1(v)
hereof.


 


“Undefeased Note” has the meaning set forth in Section
2.7.


 


“Underwritten Net Cash Flow”
means, as of any date of calculation with respect to the Mortgaged Property,
(i) the Operating Revenues calculated based upon the base rent portion of the
Rents during the most recent three month period for which such information was
furnished to Lender pursuant to Section 5.1(r)(v) hereof, annualized,
plus (ii) any utility and other income during the most recent twelve month
period for which such information was furnished to Lender pursuant to Section
5.1(r)(v) hereof, minus (iii) the Operating Expenses with respect to the
Mortgaged Property during the most recent twelve month period for which such
information was furnished to Lender pursuant to Section 5.1(r)(v)
hereof, each as determined by Lender and after Lender makes adjustments, if
necessary, for


 


(1)           expenses
for management fees equal to the greater of actual management fees or 5.00% of
Operating Revenues for such period,


 


(2)           a
minimum vacancy allowance equal to 5.00%,


 


(3)           an
annual minimum capital expenditure reserve equal to the product of $50.00
multiplied by the total number of Homesites at the Mortgaged Property,


 


26

















 


(4)           exclusion
of rental income and expenses from manufactured homes owned by Borrower,


 


(5)           exclusion
of any other revenue items reasonably deemed nonrecurring by Lender, and


 


(6)           inclusion
of increases in future operating costs as determined by Lender, in its sole
discretion, so that, assuming current occupancy, the annualized underwritten
Operating Expenses fully reflect the operating costs expected to be incurred
over the next twelve month period.


 


“U.S. Obligations”
shall mean securities that are (i) direct obligations of the United States of
America for the full and timely payment of which its full faith and credit is
pledged or (ii) obligations of an entity controlled or supervised by and acting
as an agency or instrumentality and guaranteed as a full faith and credit
obligation which shall be fully and timely paid by the United States of
America, which in either case are not callable or redeemable at the option of
the issuer thereof (including a depository receipt issued by a bank (as defined
in Section 3(a)(2) of the United States Securities Act)) as custodian with
respect to any such U.S. Obligations or a specific payment of principal of or
interest on any such U.S. Obligations held by such custodian for the account of
the holder of such depository receipt, provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the securities or the specific payment of principal
of or interest on the securities evidenced by such depository receipt.


 


“Use” means, with
respect to any Hazardous Substance, the generation, manufacture, processing,
distribution, handling, use, treatment, recycling or storage of such Hazardous
Substance or transportation of such Hazardous Substance in connection with or
affecting Borrower or the Mortgaged Property.


 


“Welfare Plan”
means an employee welfare benefit plan as defined in Section 3(1) of ERISA
established or maintained by Borrower or any ERISA Affiliate or with respect to
which Borrower or any ERISA Affiliate has an obligation to make contributions
and covers any current or former employee of Borrower or any ERISA Affiliate.


 


“Working Capital Budget”
means, with respect to any Fiscal Year, the component of the Operating Budget
for such fiscal year submitted by Borrower to Lender in accordance with the
provisions of Section 5.1(r)(viii) which
sets forth, for each calendar month or other applicable time period, the amount
of the working capital reserve budgeted for such time period and changed
thereto over the course of such budget period (such working capital reserve
amount for any given time period is herein referred to as the “Working Capital Reserve Amount”).


 


“Working Capital Reserve
Account” has the meaning set forth in Section
2.13(d) hereof.


 


“Working Capital Reserve
Amount” has the meaning set forth in the definition of Working
Capital Budget.


 


27

















 


ARTICLE II.

GENERAL TERMS


 


Section 2.1.            The Loan.


 


(a)           Subject
to the terms and conditions of this Agreement, Lender shall lend to Borrower on
the Closing Date the Loan Amount.  The
proceeds of the Loan shall be used solely for the purposes identified in Section 2.2 hereof.  Lender is hereby authorized to fund directly from the proceeds of
the Loan advanced at Closing (net of any deposits or payments made by Borrower
or its Affiliates prior to Closing) (i) the Origination Fee, (ii) the deposits
to the Deferred Maintenance Escrow Account, the Real Estate Taxes Escrow
Account, the Insurance Escrow Account and the Replacement Reserve Account
required to be funded from Loan proceeds pursuant to Section
2.13, (iii) the out-of-pocket expenses incurred by Lender in
connection with the origination and funding of the Loan and (iv) the reasonable
fees and expenses of Lender’s and Borrower’s counsel.


 


(b)           The
Loan shall constitute one general obligation of Borrower to Lender and shall be
secured by the security interest in and Liens granted upon all of the
Collateral, and by all other security interests and Liens at any time or times
hereafter granted by Borrower to Lender as security for the Loan, as well as by
the Liens against the Crossed Property created under the Crossed Loan
Documents.


 


Section 2.2.            Use of Proceeds.  Proceeds of the Loan shall be used only for
the following purposes:  (a) to, with
respect to certain of the Mortgaged Property, finance a portion of the
acquisition cost of, and, with respect to other of the Mortgaged Property,
refinance existing mortgage debt at such Mortgaged Property, (b) to pay to
Lender the Origination Fee, (c) to make the required deposits to the Deferred
Maintenance Escrow Account, the Real Estate Taxes Escrow Account, the Insurance
Escrow Account and the Replacement Reserve Account, (d) to pay Transaction
Costs (including the reasonable out-of-pocket expenses incurred by Lender in
connection with the origination and funding of the Loan) and (e) to pay
reasonable fees, expenses and disbursements of Lender’s and Borrower’s
counsel.  Any proceeds of the Loan in
excess of the amounts applied in accordance with Sections 2.1(a) and 2.2(a)-(e)
may be used by the Borrower for its general purposes (including to make a
distribution to the Member).


 


Section 2.3.            Security for the
Loan.  The Note and
Borrower’s obligations hereunder and under all other Loan Documents shall,
together with the Crossed Indebtedness, be secured by (a) Liens upon the
Mortgaged Property pursuant to the Mortgages, (b) the Contract Assignment, (c)
the Manager’s Subordination, (d) the Assignment of Rents and Leases, and all other
security interests and Liens granted in this Agreement and in the other Loan
Documents and under the Crossed Loan Documents.


 


Section 2.4.            Borrower’s Note.  Borrower’s obligation to pay the principal
of and interest on the Loan and all other amounts due under the Loan Documents
shall be evidenced initially by the Note, duly executed and delivered by
Borrower on the Closing Date.  The Note
shall be payable as to principal, interest and all other amounts due under the
Loan Documents, as specified in this Agreement, with a final maturity on the
Maturity Date.  Lender shall have the
right to have the Note subdivided, by exchange for promissory notes of lesser
denominations in


 


28

















 


the form of the initial Note, upon written request to
Borrower and, in such event, Borrower shall promptly execute additional or
replacement Notes, at the Lender’s sole expense with respect to Borrower’s
reasonable out-of-pocket costs in the event and to the extent Borrower incurs costs
in connection therewith other than in connection with the execution of such
additional or replacement Notes.  At no
time shall the aggregate original principal amount of the Note (or of such
replacement Notes) exceed the Loan Amount.


 


Section 2.5.            Principal and
Interest.


 


(a)           Interest
on the Loan shall accrue at the rate set forth in Section
2.5(b) below commencing on the Closing Date.  Borrower shall make a payment to Lender of
interest only on the Closing Date for the period from the Closing Date through
the last day of the calendar month in which the Closing Date occurs.  Commencing on the first day of the second
calendar month following the calendar month in which the Closing Date occurs
(the “First Payment Date”) and on the first
day of each calendar month thereafter (each, with the First Payment Date, a “Payment Date”), Borrower shall make equal monthly
payments (each, a “Monthly Debt Service Payment”)
of principal and interest in the amount of $135,812.61 (the “Monthly Debt Service Payment Amount”).  The entire outstanding Principal
Indebtedness of the Loan and the Note, together with all accrued but unpaid
interest thereon and all other amounts due under the Loan Documents, shall be
due and payable by Borrower to Lender on the Maturity Date.  Interest shall be computed on the basis of a
360 day year and the actual number of days elapsed during any month or other
accrual period.


 


(b)           The
Principal Indebtedness shall bear interest at a rate per annum equal to 5.05%,
increasing, however, to the Default Rate while an Event of Default has occurred
and is continuing, as provided in Section 2.5(c)
below.


 


(c)           While
an Event of Default has occurred and is continuing, Borrower shall pay to
Lender interest at the Default Rate on any amount owing to Lender not paid when
due until such amount is paid in full.


 


(d)           If
any payment of principal, interest or other sums shall not be made to Lender on
the date the same is due hereunder or under any of the other Loan Documents,
then Borrower shall pay to Lender, in addition to all sums otherwise due and
payable, a late fee in an amount equal to five percent (5.0%) of such
principal, interest or other sums due hereunder (other than the entire
principal balance of the Loan due upon acceleration of the Loan or upon Maturity)
or under any other Loan Document (or, in the case of a partial payment, the
unpaid portion thereof), such late charge to be immediately due and payable
without demand by Lender.


 


(e)           Notwithstanding
any provision to the contrary contained in this Agreement or the other Loan
Documents, Borrower shall not be required to pay, and Lender shall not be
permitted to collect, any amount of interest in excess of the maximum amount of
interest permitted by law (“Excess Interest”).  If any Excess Interest is provided for or
determined by a court of competent jurisdiction to have been provided for in
this Agreement or in any of the other Loan Documents, then in such event: (1)
the provisions of this paragraph shall govern and control; (2) Borrower shall
not be obligated to pay any Excess Interest; (3) any Excess Interest that
Lender may have received hereunder shall be, at Lender’s option, (a) applied


 


29

















 


as a credit against either or both of the Principal
Indebtedness of the Loan or accrued and unpaid interest thereunder (not to
exceed the maximum amount permitted by law), (b) refunded to the payor thereof,
or (c) any combination of the foregoing; (4) the interest rate(s) provided for
herein shall be automatically reduced to the maximum lawful rate allowed from
time to time under applicable law (the “Maximum Rate”),
and this Agreement and the other Loan Documents shall be deemed to have been
and shall be, reformed and modified to reflect such reduction; and (5) Borrower
shall not have any action against Lender for any damages arising out of the
payment or collection of any Excess Interest. 
Notwithstanding the foregoing, if for any period of time interest on any
Indebtedness is calculated at the Maximum Rate rather than the applicable rate
under this Agreement, and thereafter such applicable rate becomes less than the
Maximum Rate, the rate of interest payable on such Indebtedness shall, to the
extent permitted by law, remain at the Maximum Rate until Lender shall have received
or accrued the amount of interest which Lender would have received or accrued
during such period on Indebtedness had the rate of interest not been limited to
the Maximum Rate during such period.  If
the Default Rate shall be finally determined to be unlawful, then the Maximum
Rate shall be applicable during any time when the Default Rate would have been
applicable hereunder, provided however that if the Maximum Rate is greater than
the applicable interest rate, then the foregoing provisions of this paragraph
shall apply.


 


Section 2.6.            Prepayment.


 


(a)           Limitation on Prepayment; Prepayment Consideration Due on
Acceleration.  Borrower shall
have no right to prepay the Loan in whole or part at any time, except as
expressly set forth in this Section 2.6(a).
Commencing on the First Open Prepayment Date, Borrower may prepay the Loan in
whole, but not in part, without payment of Prepayment Consideration, provided
that (i) Borrower shall provide to Lender not less than thirty (30) days’ prior
written notice of such prepayment, (ii) together with such prepayment Borrower
also shall pay all accrued and unpaid interest and all other Obligations and
(iii) if such prepayment occurs on any day other than a Payment Date, then
together therewith Borrower also shall pay to Lender the amount of interest
that would have accrued on the amount being prepaid from and including the date
of such prepayment to (but excluding) the first day of the following calendar
month. Borrower shall not be required to pay any Prepayment Consideration with
respect to an application of insurance proceeds or condemnation awards by
Lender pursuant to the Loan Agreement or Mortgage in the absence of an Event of
Default.


 


(b)           Prepayment Consideration Due.  If the Maturity Date shall be accelerated to
a date prior to the Scheduled Maturity Date, or if any prepayment of all or any
portion of the Principal Indebtedness hereunder occurs, whether in connection
with Lender’s acceleration of the unpaid Principal Indebtedness of the Loan or
in any other circumstances whatsoever, or if the Mortgage is satisfied or
released by foreclosure (whether by power of sale or judicial proceeding), deed
in lieu of foreclosure or by any other means, then the Prepayment Consideration
shall become immediately due and owing and Borrower shall forthwith pay the
Prepayment Consideration to Lender. The foregoing shall not create any right of
prepayment. Borrower shall have no right whatsoever to prepay all or any
portion of the Principal Indebtedness of the Note, except as set forth in Section
2.6(a) above.


 


(c)           Definitions. 
The following terms shall have the meanings indicated:


 


30

















 


The “Prepayment Consideration”
shall be the amount equal to the sum of (i) an amount equal to the interest
which would have accrued on the Principal Indebtedness of the Note during the
remaining days of the full calendar month containing the date (the “Event Date”) which is the earlier of (x) the date
of prepayment of the Loan or (y) such earlier date upon which the entire
remaining Principal Indebtedness of the Loan shall become due and payable,
whether as a result of acceleration of the maturity of the Loan or otherwise,
plus (ii) the greater of (x) four percent of the Loan balance on the Event
Date, or (y) the sum of two percent of the Loan balance on the Event Date plus
an amount equal to the “Present Value Yield
Differential”, calculated as the excess, if any, of (A) the amount
of the monthly interest which would otherwise be payable on the principal balance
of this Note from (1) the date (the “Yield
Determination Date”) which is either (xx) the Event Date (if the
required interest payment described in clause (i) above has not been made
through the end of the calendar month in which the Event Date occurs) or (yy)
if the required interest payment described in clause (i) above has been made
through the end of the calendar month in which the Event Date occurs, the first
day of the calendar month following the month containing the Event Date,
through and including (2) the Scheduled Maturity Date, over (B) the amount of
the monthly interest Lender would earn if an amount equal to the Principal
Indebtedness of the Loan as of the Event Date were invested for the period from
the Yield Determination Date through the Scheduled Maturity Date at the Yield
Rate (as hereinafter defined), such difference (the “Yield
Differential”) to be discounted to present value at the Yield Rate
using the following formula:


 


	
   

  	
   

  	
   

  	
   

  	
  Yield Differential

  
	
  Present Value Yield 

  	
   

  	
  =

  	
   

  	
     (1 + r)-n

  
	
  Differential

  	
   

  	
   

  	
   

  	
   

  



 


where:


 


r=            Yield Rate, and


 


n=           the remaining Weighted
Average Life to Maturity


(as defined below)from
the Yield Determination Date.


 


The “Yield Rate”
shall be the annualized yield on securities issued by the United States
Treasury having a maturity corresponding to the then remaining Weighted Average
Life to Maturity (as defined below) of this Note as determined by Payee, as
quoted in Federal Reserve Statistical Release H.
15(519) under the heading “U.S. Government Securities - Treasury
Constant Maturities” for the Yield Rate Determination Date (as defined below),
converted to a monthly equivalent yield. 
If yields for such securities of such maturity are not shown in such
publication, then the Yield Rate shall be determined by Lender by linear
interpolation between the yields of securities of the next longer and next
shorter maturities. If said Federal Reserve Statistical Release or any other
information necessary for determination of the Yield Rate in accordance with
the foregoing is no longer published or is otherwise unavailable, then the
Yield Rate shall be determined by Payee based on comparable data.  The term “Yield
Rate Determination Date” shall mean the date which is five (5)
Business Days prior to the Yield Determination Date.  The term “Weighted Average Life to
Maturity” shall mean, at any date, the number of years (including
fractional years, expressed as a decimal (e.g., three years and three moths =
3.25 years)) obtained by dividing (x) the outstanding Principal Indebtedness of
the Loan on the Event Date into (y) the sum total of the Weighted Amortization
Products (as defined


 


31

















 


below) for each
Scheduled Principal Payment (as defined below).  The “Scheduled Principal Payment(s)”
shall mean each then remaining scheduled principal payment (assuming no
prepayment or Loan acceleration), including payment of the outstanding
principal balance of the Loan on the Scheduled Maturity Date, in respect of the
Loan.  The “Weighted
Amortization Product” for each Scheduled Principal Payment shall
mean the product of (A) the amount of such Scheduled Principal Payment
multiplied by (B) the number of years (including fractional years, expressed as
a decimal) which will elapse between the Yield Determination Date and the date
on which such Scheduled Principal Payment is to be made under this Loan
Agreement.


 


Borrower agrees that the Prepayment Consideration
required hereunder is reasonable. 
Borrower has given individual weight to the consideration in this
transaction for this waiver and agreement.


 


Section 2.7.            Defeasance.


 


(a)           Total
Defeasance.  Borrower shall have the
right at any time after the First Open Defeasance Date and prior to the First
Open Prepayment Date to obtain a release of the Lien of the Mortgage
encumbering the Mortgaged Property (a “Total
Defeasance”) upon satisfaction of the following conditions:


 


(i)            Borrower shall provide
Lender at least thirty (30) days’ prior written notice (or such shorter period
of time if permitted by Lender in its sole discretion) specifying a date (the “Defeasance Date”) on which Borrower shall have
satisfied the conditions in this Section 2.7(a) and on which it shall
effect the Total Defeasance;


 


(ii)           Borrower shall pay to
Lender (A) all payments of interest due on the Loan to and including the
Defeasance Date and (B) all other sums, then due under the Note, this Loan
Agreement, the Mortgage and the other Loan Documents;


 


(iii)          Borrower shall
irrevocably deposit the Total Defeasance Collateral into the Defeasance
Collateral Account and otherwise comply with the provisions of this Section
2.7(a) and Sections 2.7(c) and (d) hereof;


 


(iv)          Borrower shall execute
and deliver to Lender a Security Agreement in respect of the Defeasance
Collateral Account and the Total Defeasance Collateral;


 


(v)           Borrower shall deliver
to Lender an opinion of counsel for Borrower that is customary in commercial
lending transactions and subject only to normal qualifications, assumptions and
exceptions opining, among other things, that (w) Lender has a legal and valid
perfected first priority security interest in the Defeasance Collateral Account
and the Total Defeasance Collateral, (x) if a Securitization has occurred, the
REMIC Trust formed pursuant to such Securitization will not fail to maintain
its status as a “real estate mortgage investment conduit” within the meaning of
Section 860D of the Code as a result of the Total Defeasance pursuant to this Section
2.7(a), (y) a Total Defeasance pursuant to this Section 2.7 will not
result in a deemed exchange for purposes of the Code and will not adversely
affect the status of the Loan as indebtedness for federal income tax purposes,
(z) delivery of the Total Defeasance Collateral and the grant


 


32

















 


of a security interest therein to Lender shall not
constitute an avoidable preference under Section 547 of the Bankruptcy Code or
applicable state law;


 


(vi)          If and to the extent
required by the Rating Agencies, a non-consolidation opinion with respect to
the Successor Borrower;


 


(vii)         Borrower shall deliver to
Lender a confirmation in writing from the applicable Rating Agencies to the
effect that the release of the Mortgaged Property from the Lien of the Mortgage
as contemplated by this Section 2.7(a) and the substitution of the Total
Defeasance Collateral will not result in a downgrading, withdrawal or
qualification of the respective ratings in effect immediately prior to such
defeasance for the Certificates issued in connection with the Securitization
which are then outstanding;


 


(viii)        Borrower shall deliver an
officer’s certificate certifying that the requirements set forth in this Section
2.7 have been satisfied;


 


(ix)           Borrower shall deliver
a certificate of a nationally recognized public accounting firm reasonably
acceptable to Lender certifying that the Total Defeasance Collateral will
generate monthly amounts equal to or greater than the Scheduled Defeasance
Payments;


 


(x)            Borrower shall deliver
such other certificates, opinions, documents and instruments as Lender may
reasonably request; and


 


(xi)           Borrower shall pay all
costs and expenses of Lender incurred in connection with the defeasance,
including Lender’s reasonable attorneys’ fees and expenses and Rating Agency
fees and expenses.


 


If a Total Defeasance occurs and all of the requirements of this Section
2.7 have been satisfied, including those set forth in Section 2.7(e) below, and provided no “Event
of Default” (as defined in any of the Crossed Loan Agreements) under any of the
Crossed Loan Agreements exists, (i) Lender shall execute any and all documents
required to release the Mortgaged Property from the Lien of the Mortgage and
the Assignment of Leases and the Total Defeasance Collateral, pledged pursuant
to the Security Agreement, shall be the sole source of collateral securing the
Loan.  In connection with any such
release of the Lien, Borrower shall submit to Lender, not less than thirty (30)
days prior to the Defeasance Date (or such shorter time as permitted by Lender
in its sole discretion), a release of Lien (and related Loan Documents) for
execution by Lender. Such release shall be in a form appropriate in the
jurisdiction in which the Mortgaged Property is located and contain standard
provisions protecting the rights of a releasing lender. In addition, Borrower
shall provide all other documentation Lender reasonably requires to be
delivered by Borrower in connection with such release. Borrower shall pay all
costs, taxes and expenses associated with the release of the Lien of the
Mortgage and the Assignment of Leases, including Lender’s reasonable attorneys’
fees.  Except as set forth in this Section
2.7(a)(or in Section 2.7(b) below), no repayment, prepayment or
defeasance of all or any portion of the Loan shall cause, give rise to a right
to require, or otherwise result in, the release of the Lien of the Mortgage on
the Mortgaged Property.


 


33

















 


(b)           Partial
Defeasance.   Borrower shall, as a
condition to and only in connection with a Partial Release of a Partial Release
Property after the First Open Defeasance Date and prior to the First Open
Prepayment Date as provided in Section 2.17 below, have the right to
defease a portion of the Loan (a “Partial Defeasance”)
upon satisfaction of the following conditions:


 


(i)            Borrower shall provide
Lender at least thirty (30) days’ prior written notice (or such shorter period
of time if permitted by Lender in its sole discretion) specifying a date (the “Partial Defeasance Date”) on which Borrower shall
have satisfied the conditions in this Section 2.7(b) and on which it
shall effect the Partial Defeasance;


 


(ii)           Borrower shall pay to
Lender (A) all payments of interest due on the Loan to and including the
Partial Defeasance Date and (B) all other sums, then due under the Note, this
Loan Agreement, the Mortgage and the other Loan Documents;


 


(iii)          Borrower shall
irrevocably deposit the Partial Defeasance Collateral into the Defeasance
Collateral Account and otherwise comply with the provisions of this Section
2.7(b) and Sections 2.7(c) and (d) hereof;


 


(iv)          Lender shall prepare (at
Borrower’s expense) all necessary documents to modify this Loan Agreement and
to amend and restate the Note and issue two substitute notes, one note having a
principal balance equal to the Partial Defeasance Amount (the “Defeased Note”),
and the other note having a principal balance equal to the excess of
(A) the then-outstanding principal amount of the Loan, over (B) the
amount of the Defeased Note (the “Undefeased Note”). The Defeased Note
and Undefeased Note shall have identical terms as the Note except for the
principal balance and monthly payments. The Defeased Note and the Undefeased
Note shall be cross defaulted and cross collateralized unless the Rating
Agencies shall require otherwise or unless a Successor Borrower that is not an
Affiliate of Borrower is established pursuant to Section 2.7(d). A
Defeased Note may not be the subject of any further defeasance;


 


(v)           Borrower shall execute
and deliver to Lender a Security Agreement in respect of the Defeasance
Collateral Account and the Partial Defeasance Collateral;


 


(vi)          Borrower shall deliver
to Lender an opinion of counsel for Borrower that is customary in commercial
lending transactions and subject only to normal qualifications, assumptions and
exceptions opining, among other things, that (w) Lender has a legal and valid
perfected first priority security interest in the Defeasance Collateral Account
and the Partial Defeasance Collateral, (x) if a Securitization has occurred,
the REMIC Trust formed pursuant to such Securitization will not fail to
maintain its status as a “real estate mortgage investment conduit” within the
meaning of Section 860D of the Code as a result of the Partial Defeasance
pursuant to this Section 2.7(b), (y) a Partial Defeasance pursuant to
this Section 2.7 will not result in a deemed exchange for purposes of
the Code and will not adversely affect the status of the Loan as indebtedness
for federal income tax purposes, (z) delivery of the Partial Defeasance
Collateral and the grant of a security interest therein to Lender shall not
constitute an avoidable preference under Section 547 of the Bankruptcy Code or
applicable state law;


 


34

















 


(vii)         If and to the extent
required by the Rating Agencies, a non-consolidation opinion with respect to
the Successor Borrower;


 


(viii)        Borrower shall deliver to
Lender a confirmation in writing from the applicable Rating Agencies to the
effect that the release of the Partial Release Property from the Lien of the
Mortgage as contemplated by this Section 2.7(b) and the substitution of
the Partial Defeasance Collateral will not result in a downgrading, withdrawal
or qualification of the respective ratings in effect immediately prior to such
defeasance for the Certificates issued in connection with the Securitization
which are then outstanding;


 


(ix)           Borrower shall deliver
an officer’s certificate certifying that the requirements set forth in this Section
2.7 have been satisfied;


 


(x)            Borrower shall deliver
a certificate of a nationally recognized public accounting firm reasonably
acceptable to Lender certifying that the Partial Defeasance Collateral will
generate monthly amounts equal to or greater than the Scheduled Defeasance
Payments;


 


(xi)           Borrower shall deliver
such other certificates, opinions, documents and instruments as Lender may
reasonably request; and


 


(xii)          Borrower shall pay all
costs and expenses of Lender incurred in connection with the defeasance,
including Lender’s reasonable attorneys’ fees and expenses and Rating Agency
fees and expenses.


 


(c)           Defeasance
Collateral Account.  On or before
the date on which Borrower delivers the Defeasance Collateral, Borrower or
Successor Borrower (as applicable) shall open at any Eligible Bank the
defeasance collateral account (the “Defeasance
Collateral Account”) which shall at all times be an Eligible
Account. The Defeasance Collateral Account shall contain only (i) Defeasance
Collateral and (ii) cash from interest and principal paid on the Defeasance
Collateral. All cash from interest and principal payments paid on the
Defeasance Collateral shall be paid over to Lender on each Payment Date and
applied to the monthly installments of interest on the Loan (and in the case of
a Partial Defeasance, the portion thereof evidenced by the Defeased Note) and,
upon Maturity, to accrued interest and the Principal Balance of the Loan (and
in the case of a Partial Defeasance, the portion thereof evidenced by the
Defeased Note)  Borrower shall cause the
Eligible Bank at which the Defeasance Collateral is deposited to enter an
agreement with Borrower and Lender, satisfactory to Lender in its sole
discretion, pursuant to which such Eligible Bank shall agree to hold and
distribute the Defeasance Collateral in accordance with this Loan Agreement.
Borrower (or Successor Borrower, as applicable) shall be the owner of the
Defeasance Collateral Account and shall report all income accrued on Defeasance
Collateral for federal, state and local income tax purposes in its income tax
return. Borrower shall prepay all costs and expenses associated with opening
and maintaining the Defeasance Collateral Account. Lender shall not in any way
be liable by reason of any insufficiency in the Defeasance Collateral Account.


 


(d)           Successor
Borrower.  In connection with a
Defeasance under this Section 2.7, Borrower shall, if required by the
Rating Agencies or if Borrower so elects or Lender


 


35

















 


requires, establish or designate a successor entity
(the “Successor Borrower”) which shall be a
single purpose bankruptcy remote entity and which shall be approved by the
Rating Agencies. Any such Successor Borrower may, at Borrower’s option, be an
Affiliate of Borrower unless the Rating Agencies or Lender shall require
otherwise. Borrower shall transfer and assign all obligations, rights and
duties under and to the Note, together with the Defeasance Collateral, to such
Successor Borrower.  Such Successor
Borrower shall assume the obligations under the Note and the Security
Agreement. Borrower shall pay $1,000 to any such Successor Borrower as
consideration for assuming the obligations under the Note and the Security
Agreement. Borrower shall pay all reasonable costs and expenses incurred by
Lender, including Lender’s attorney’s fees and expenses incurred in connection
therewith, and all fees, expenses and other charges of the Rating Agencies.


 


(e)           Crossed
Loans.  Notwithstanding anything to
the contrary contained herein, (i) if any of the Coterminous Crossed Loans
remains outstanding and in any part undefeased, then in connection with a Total
Defeasance of the Loan, the Mortgaged Property will be released from the Liens
of the Loan Documents if and only if all of the Coterminous Crossed Loans have
been fully defeased in accordance with the terms and conditions of the
applicable Crossed Loan Documents, and until such full defeasance of all the
Crossed Loans this Loan Agreement and the other Loan Documents as they relate
to the Borrower and the Mortgaged Property shall remain in full force and
effect notwithstanding the Total Defeasance of the Loan, and (ii) in addition,
if any “Event of Default” (as defined in any of the Crossed Loan Agreements)
under any of the Crossed Loan Agreements exists, then, in connection with a
Total Defeasance of the Loan, the Mortgaged Property will be released from the
Liens of the Loan Documents if and only if all of the Crossed Loans have been
fully repaid or defeased in accordance with the terms and conditions of the
Crossed Loan Documents, and until such full repayment or defeasance of all the
Crossed Loans this Loan Agreement and the other Loan Documents as they relate
to the Borrower and the Mortgaged Property shall remain in full force and
effect notwithstanding the Total Defeasance of the Loan.


 


Section 2.8.            Application of
Payments After Event of Default. 
After an Event of Default, Borrower irrevocably waives the right to
direct the application of any and all payments at any time hereafter received
by Lender from or on behalf of Borrower, and Borrower irrevocably agrees that
Lender shall have the continuing exclusive right to apply any and all such
payments and any and all proceeds and recoveries from the Pledged Accounts, the
Mortgaged Property or Borrower after the occurrence and during the continuance
of an Event of Default, in Lender’s sole discretion, to the Indebtedness and
other amounts then outstanding under this Agreement, and to the Crossed
Indebtedness, in such order and manner as Lender may determine in its sole and
absolute discretion, including, without limitation, reasonable out-of-pocket
costs and expenses of Lender reimbursable pursuant to the terms of this
Agreement arising as a result of such repayment, any accrued and unpaid interest
then payable with respect to the Loan or the portion thereof being repaid, the
Principal Indebtedness, any accrued and unpaid Prepayment Consideration in
respect of any such Principal Indebtedness or the portion thereof being repaid,
any other sums then due and payable to or for the benefit of Lender pursuant to
this Agreement or any other Loan Document(s), or to Property Expenses and
Capital Improvement Costs for the Mortgaged Property, or to fund Reserve
Accounts.


 


36

















 


Section 2.9.            Method and Place
of Payment.  Except as
otherwise specifically provided herein, all payments and prepayments under this
Agreement and the Note shall be made to Lender not later than 12:00 p.m.,
Eastern time, on the date when due and shall be made in lawful money of the
United States of America by wire transfer in federal or other immediately
available funds to its account at such bank(s) as Lender may from time to time
designate.  Any funds received by Lender
after such time shall, for all purposes hereof, be deemed to have been paid on
the next succeeding Business Day. 
Lender shall notify Borrower in writing of any changes in the account to
which payments are to be made.  All
payments made by Borrower hereunder, or by Borrower under the other Loan
Documents, shall be made irrespective of, and without any deduction for, any
defenses, set-offs or counterclaims. 
Whenever any payment to be made hereunder shall be stated to be due on a
day that is not a Business Day, the payment may be made on the next succeeding
Business Day.


 


Section 2.10.          Taxes.


 


(a)           All
payments made by or on behalf of Borrower under this Agreement shall be made
free and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority (the “Tax
Liabilities”), excluding net income taxes and franchise taxes (imposed in
lieu of net income taxes) imposed on the Lender as a result of a present or
former connection between such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority thereof
or therein including being a citizen or resident or national of, or carrying on
a business or maintaining a permanent establishment in such jurisdiction (other
than any such connection arising solely from such Lender’s having executed,
delivered or performed its obligations or received a payment under, or
enforced, this Agreement if, at the time such Lender first became a party to
this Agreement, the applicable Governmental Authority would not have imposed
such taxes but instead such taxes are a result of a change in relevant tax law
including, but not limited to a change in the generally accepted interpretation
of existing tax law).  If Borrower shall
be required by law to deduct any such Tax Liabilities (or amounts in estimation
or reimbursement for the same) from or in respect of any sum payable hereunder
to Lender, then the sum payable hereunder shall be increased (such increase, “additional
amounts”) as may be necessary so that, after making all required
deductions, Lender receives an amount equal to the sum it would have received
had no such deductions been made.


 


(b)           If
Lender is not a “United States person” within the meaning of
Section 7701(a)(30) of the Code (a “Foreign Lender”) Lender shall
deliver to Borrower, prior to receipt of any payment subject to withholding
under the Code (or upon accepting an assignment of an interest herein), two
duly signed completed copies of either Internal Revenue Service (“IRS”)
Form W-8BEN or any successor thereto (relating to Foreign Lender and
entitling it to an exemption from, or reduction of, withholding tax on all
payments to be made to Foreign Lender by Borrower pursuant to this Agreement)
or IRS Form W-8ECI or any successor thereto (relating to all payments to
be made to Foreign Lender by Borrower pursuant to this Agreement) or such other
evidence satisfactory to Borrower and Borrower that Foreign Lender is entitled
to an exemption from, or reduction of, U.S. withholding tax, including any
exemption pursuant to Section 881(c) of the Code.  If the form W-8BEN or W-8ECI provided by
Lender at the time


 


37

















 


such Lender first becomes a party to this Agreement
indicates a United States interest withholding tax rate in excess of zero,
withholding tax at such rate shall be considered excluded from Tax Liabilities
reimbursable by Borrower to Lender under Section 2.10(a) hereof, except
to the extent that such Lender’s assignor (if any) was entitled, at the time of
assignment, to receive additional amounts from Borrower pursuant to Section
2.10(a).  Thereafter and from time to
time, Foreign Lender shall (i) promptly submit to Borrower such additional
duly completed and signed copies of one of such forms (or such successor forms
as shall be adopted from time to time by the relevant United States taxing
authorities) as may then be available under then current United States laws and
regulations to avoid, or such evidence as is satisfactory to Borrower and
Borrower of any available exemption from or reduction of, United States withholding
taxes in respect of all payments to be made to Foreign Lender by Borrower
pursuant to this Agreement, (ii) promptly notify Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction, and (iii) take such steps as shall not be materially
disadvantageous to it, in the reasonable judgment of such Lender, and as may be
reasonably necessary (including the redesignation of its lending office) to
avoid any requirement of applicable laws that Borrower make any deduction or
withholding for taxes from amounts payable to such Foreign Lender.  Notwithstanding any other provision of this
paragraph, a Foreign Lender shall not be required to deliver any form pursuant
to this paragraph that such Foreign Lender is not legally able to deliver.


 


(c)           If
a Lender transfers its rights and obligations under this Agreement from its
lending office to another lending office, withholding tax (which shall be set
forth in the IRS form or forms described in this Section 2.10 provided by such
Lender to Borrower upon such transfer, taking into account the transfer)
imposed on the Lender after the transfer in excess of the rate imposed prior to
such transfer shall be deemed to be for purposes of this Agreement excluded
from Tax Liabilities reimbursable by Borrower to Lender for periods after the
transfer.  This Section 2.10(c)
shall not apply with respect to a change in lending office required for the
particular right or obligation as a result of any change in, or the adoption or
phase-in of, any law, rule or regulation applicable to such Lender and
occurring after the date of this Agreement and the applicable Lender is unable,
using commercially reasonable efforts, to change such lending office to another
lending office that is subject to a lower withholding tax rate.


 


(d)           If
any Lender voluntarily changes its residence or place of business or takes any
other similar action, and the effect of such change or action, as of the date
thereof, would be to increase the Tax Liabilities of such Lender, the Borrower
shall not be obligated to pay any additional amounts in respect of such
increase.


 


(e)           If
and to the extent that a Foreign Lender sells a participating interest to a
participant which, pursuant to Section 9.9(a), seeks to obtain the
benefits of Section 2.10, then such Foreign Lender shall promptly deliver to
Borrower (i) two duly signed completed copies of the forms or statements
required to be provided by such Lender as set forth above, to establish the
portion of any such sums paid or payable with respect to which such Lender acts
for its own account that is not subject to U.S. withholding tax, and
(ii) two duly signed completed copies of IRS Form W-8IMY (or any
successor thereto), together with any information such Lender chooses to
transmit with such form, and any other certificate or statement of exemption
required under the Code, to establish that such Lender is not acting for its
own account with respect to a portion of any such sums payable to such Lender.  Notwithstanding any other provision of this


 


38

















 


paragraph, a Foreign Lender shall not be required to
deliver any form pursuant to this paragraph that such Foreign Lender is not
legally able to deliver.


 


(f)            For
any period with respect to which a Lender has failed to comply with the
requirements of Section 2.10(b), (e) or (h) (other than to the extent such
failure is due to a change in law, rule or regulation occurring subsequent to
the date on which a form originally was required to be provided), Borrower
shall not be required to pay additional amounts to the Lender pursuant to this
Section 2.10 with respect to Tax Liabilities imposed as a result of such
failure.


 


(g)           Borrower
may, without reduction, withhold any Tax Liabilities required to be deducted
and withheld from any payment under any of the Loan Documents with respect to
which Borrower is not required to pay additional amounts under this Section
2.10.


 


(h)           Upon
Borrower’s request, if the Lender is a “United States person” within the
meaning of Section 7701(a)(30) of the Code, Lender shall, if and to the
extent required by law, execute and deliver to Borrower an IRS Form W-9.


 


Section 2.11.          Cross-Collateralization;
Contribution; Release of Cross-Collateralization.


 


(a)           Until
one year and one day following repayment of the Indebtedness and the Crossed
Indebtedness and satisfaction of all obligations under this Agreement and the
Crossed Loan Agreement, Borrower acknowledges and agrees (subject to Lender’s
election(s) at Lender’s sole discretion from time to time pursuant to Section 2.11(g) below): (i) that the Mortgaged
Property shall secure not only the Loan but also the Crossed Loans, and that
the Liens of the Loan Documents shall constitute Liens securing not only the
Loan but also the Crossed Loans; (ii) that the Crossed Properties shall secure
the Loan as well as the Crossed Loan(s) secured by such Crossed Properties; and
(iii) that Lender would not make the Loans to Borrower or the loans
constituting the Crossed Loans unless Borrower and the Crossed Borrowers
granted liens on the Mortgaged Property and, in addition, the Crossed
Properties of the Crossed Borrowers to secure the payment of the Loan and the
Crossed Loans.


 


(b)           Until
the date that is one year and one day after the date that all of the Loan and
the Crossed Loans shall have been paid and satisfied in full, Borrower (i)
shall have no right of subrogation with respect to the Crossed Loans and (ii)
waives any right to enforce any remedy which Lender now has or may hereafter
have against the Crossed Borrowers, any endorser or any guarantor of all or any
part of the Crossed Loans or any other individual or entity, and Borrower
waives any benefit of, and any right to participate in, any security or
collateral given to Lender to secure the payment or performance of all or any
part of the Crossed Loans or any other liability of any of the Crossed
Borrowers to Lender.  Should Borrower
have the right, notwithstanding the foregoing, to exercise its subrogation
rights, Borrower hereby expressly and irrevocably (1) subordinates any and all
rights at law or in equity to subrogation, reimbursement, exoneration,
contribution, indemnification or set off that Borrower may have to the payment
in full in cash of the Loan and the Crossed Loans and (2) waives any and all
defenses available to a surety, guarantor or accommodation co-obligor until the
Loan and the Crossed Loans are paid in full in cash.  Borrower acknowledges and agrees that this


 


39

















 


subordination is intended to benefit Lender and shall
not limit or otherwise affect Borrower’s liability hereunder or the
enforceability of this Loan Agreement or the Crossed Loan Documents.


 


(c)           Borrower
agrees that any and all claims of Borrower against any of the Crossed Borrowers
or any endorser or any guarantor of all or any part of the Crossed Loans
(collectively, the “Crossed Obligors”) with
respect to any obligations, liabilities or indebtedness now or hereafter owing
by the Crossed Obligors, or any of them, to Borrower, or otherwise existing or
claimed to be owed or to exist on the part of any of the Crossed Obligors, or
against any of their respective properties (collectively, the “Crossed Party Obligations”) shall be subordinate
and subject in right of payment to the prior payment, in full and in cash, of
all the Loan and the Crossed Loans. 
Notwithstanding any right of Borrower to ask, demand, sue for, take or
receive any payment from any of the Crossed Obligors, all rights, liens and security
interests of Borrower, whether now or hereafter arising and howsoever existing,
in any assets of any of the Crossed Obligors shall be and are subordinated to
the rights of Lender in those assets and otherwise, under the Loan Documents,
the Crossed Loan Documents and otherwise, and Borrower shall not, until the
date that is one year and one day after the date that all of the Loan and the
Crossed Loans shall have been paid and satisfied in full,  (i) assert, collect, sue upon, or enforce
all or any part of the Crossed Party Obligations;  (ii) commence or join with any other creditors of any of the
Crossed Obligors in commencing any bankruptcy, reorganization, receivership or
insolvency proceeding against any of the Crossed Obligors;  (iii) take, accept, ask for, sue for,
receive, set off or demand any payments upon the Crossed Party Obligations; or
(iv) take, accept, ask for, sue for, receive, demand or allow to be created
liens, security interests, mortgages, deeds of trust or pledges of or with
respect to any of the assets of any of the Crossed Obligors in favor of or for
the benefit of Borrower.


 


(d)           If
all or any part of the assets of any of the Crossed Obligors, or the proceeds
thereof, are subject to any distribution, division or application to the creditors
of such Crossed Obligor, whether partial or complete, voluntary or involuntary,
and whether by reason of liquidation, bankruptcy, arrangement, receivership,
assignment for the benefit of creditors or any other action or proceeding, or
if the business of any such Crossed Obligor is dissolved or if substantially
all of the assets of any such Crossed Obligor are sold, then, and in any such
event (such events being herein referred to as an “Crossed
Obligor Insolvency Event”), any payment or distribution of any kind
or character, either in cash, securities or other property, which shall be
payable or deliverable upon or with respect to any Crossed Party Obligations
shall be paid or delivered directly to the Lender for application on the Loan
and the Crossed Loans, due or to become due, until such Loan and Crossed Loans
shall have first been fully paid and satisfied (in cash).  Should any payment, distribution, security
or instrument or proceeds thereof be received by Borrower upon or with respect
to the Crossed Party Obligations after any Crossed Obligor Insolvency Event and
prior to the payment in full and satisfaction of all of the Loan and Crossed
Loans, Borrower shall receive and hold the same in trust, as trustee, for the
benefit of Lender and shall forthwith deliver the same to Lender in precisely
the form received (except for the endorsement or assignment of Borrower where
necessary), for application to any of the Loan or Crossed Loans, due or not
due, and, until so delivered, the same shall be held in trust by Borrower as
the property of Lender.  If Borrower
fails to make any such endorsement or assignment to Lender, Lender or any of
its officers or employees is irrevocably authorized to make the same.  Borrower agrees that until the Loan and
Crossed Loans have been paid in full


 


40

















 


(in cash) and satisfied, Borrower will not assign or
transfer to any individual or entity (other than Lender) any claim Borrower has
or may have against any Crossed Obligor.


 


(e)           Subject
to the provisions of Section 2.11(g), to
the extent that any collection upon any of the Loan or the Crossed Loans is
made by Lender from one of the Crossed Borrowers or the Crossed Properties or
other assets of the Crossed Borrowers (a “Crossed
Loans Collection”) which, taking into account all other Crossed
Loans Collections then previously or concurrently made by such Crossed
Borrower, exceeds the amount which otherwise would have been collected from
such Crossed Borrower if each of Borrower and each Crossed Borrower had paid
the portion of the Loan and Crossed Loans satisfied by such Crossed Loans
Collection in the same proportion as such Crossed Borrower’s “Allocable Amount”
(as defined below) (as determined immediately prior to such Crossed Loans
Collection) bore to the aggregate Allocable Amounts of each of the Borrower and
each Crossed Borrower as determined immediately prior to the making of such
Crossed Loans Collection, then, following
payment in full in cash of the entire Loan and Crossed Loans, such Crossed
Borrower shall be entitled to receive contribution and indemnification payments
from, and be reimbursed by, each of Borrower and each of the other Crossed
Borrowers for the amount of such excess, pro
rata based upon their respective Allocable
Amounts in effect immediately prior to such Crossed Loans Collection.  As of any date of determination, the
“Allocable Amount” of Borrower or any Crossed Borrower shall be equal to the
maximum amount of the claim which could then be recovered from such Borrower or
Crossed Borrower under the Loan Documents and Crossed Loan Documents without
rendering such claim voidable or avoidable under Section 548 of Chapter 11 of
the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law.  The foregoing provision shall be for the
benefit of each of the Crossed Borrowers and Lender, but shall be subject to
modification as provided in Section 2.11(g)
below and to amendment by agreement of Borrower and Lender, in each case
without necessity of any agreement, acknowledgment or approval of any Crossed
Borrower or any notice to any Crossed Borrower.  Section 2.11(e) of each of
the Crossed Loan Agreements contains provisions similar to this Section 2.11(e) for the benefit of Lender and
(subject to the terms thereof) Borrower. 
This Section 2.11(e) and Section 2.11(e) of each of the Crossed Loan
Agreements are intended only to define the relative rights of the Borrower and
Crossed Borrowers, and nothing set forth in this Section
2.11(e) or in Section 2.11(e) of
each of the Crossed Loan Agreements is intended to or shall impair the liens
and security interests of the Loan Documents and the Crossed Loan Documents or
the obligations of the Borrower and the Crossed Borrowers thereunder.  Borrower acknowledges that the rights of
contribution and indemnification under this Section
2.11(e) and under Section 2.11(e)
of the Crossed Loan Agreements constitute assets of the Borrower or Crossed
Borrowers to which such contribution and indemnification is owing, and any such
right of contribution and indemnification owing to Borrower under Section 2.11(e) of any of the Crossed Loan
Agreements shall constitute additional Crossed Party Obligations for all
purposes under this Section 2.11.


 


(f)            Borrower
hereby consents and agrees to each of the following, and agrees that Borrower’s
obligations under this Loan Agreement and the other Loan Documents and the
Liens created under this Loan Agreement and the other Loan Documents securing
the Loan and the Crossed Loans shall not be released, diminished, impaired,
reduced or adversely affected by any of the following, and waives any common
law, equitable, statutory or other rights (including


 


41

















 


without limitation rights to notice) that Borrower
might otherwise have as a result of or in connection with any of the following:


 


(i)            Any renewal,
extension, increase, modification, alteration or rearrangement of all or any
part of the Crossed Loans, the Crossed Loan Documents, or other document,
instrument, contract or understanding between the Crossed Borrowers and Lender,
or any other parties, pertaining to the Crossed Loans or any failure of Lender
to notify Borrower of any such action.


 


(ii)           Any adjustment,
indulgence, forbearance or compromise that might be granted or given by Lender
to the Crossed Borrowers.


 


(iii)          The insolvency,
bankruptcy, arrangement, adjustment, composition, liquidation, disability,
dissolution or lack of power of any of the Crossed Borrowers or any other party
at any time liable for the payment of all or part of the Crossed Loans; or any
dissolution of any of the Crossed Borrowers, or any sale, lease or transfer of
any or all of the assets of any of the Crossed Borrowers, or any changes in the
shareholders, partners or members of any of the Crossed Borrowers; or any
reorganization of any of the Crossed Borrowers.


 


(iv)          The invalidity,
illegality or unenforceability of all or any part of the Crossed Loans, or any
document or agreement executed in connection therewith, for any reason
whatsoever, including without limitation the fact that (A) the Crossed Loans,
or any part thereof, exceeds the amount permitted by law, (B) the act of
creating the Crossed Loans or any part thereof is ultra
vires, (C) the officers or representatives
executing the Crossed Loan Documents or otherwise creating the Crossed Loans
acted in excess of their authority, (D) the Crossed Loans violate applicable
usury laws, (E) the Crossed Borrowers have valid defenses, claims or offsets
(whether at law, in equity or by agreement) which render the Crossed Loans
wholly or partially uncollectible from the Crossed Borrowers, (F) the creation,
performance or repayment of the Crossed Loans (or the execution, delivery and
performance of any document or instrument representing part of the Crossed
Loans or executed in connection with the Crossed Loans, or given to secure the
repayment of the Crossed Loans) is illegal, uncollectible or unenforceable, or
(G) any of the Crossed Loan Documents have been forged or otherwise are
irregular or not genuine or authentic, it being agreed that Borrower shall
remain liable hereon regardless of whether the Crossed Borrowers or any other
person be found not liable on the Crossed Loans or any part thereof for any
reason.


 


(v)           Any full or partial
release of the liability of the Crossed Borrowers on the Crossed Loans, or any
part thereof, or of any co-guarantors, or any other person or entity now or
hereafter liable, whether directly or indirectly, jointly, severally, or
jointly and severally, to pay, perform, guarantee or assure the payment of the
Crossed Loans, or any part thereof, it being recognized, acknowledged and
agreed by Borrower that Borrower has not been induced to enter into this Loan
Agreement or the other Loan Documents on the basis of a contemplation, belief,
understanding or agreement that other parties will be liable to pay or perform
the Loan or the Borrower’s obligations under the Loan


 


42

















 


Agreement or the other Loan Documents, or that Lender
will look to other parties to pay or perform the Crossed Loans.


 


(vi)          The taking or accepting
of any other security, collateral or guaranty, or other assurance of payment,
for all or any part of the Crossed Loans.


 


(vii)         Any release, surrender,
exchange, subordination, deterioration, waste, loss or impairment (including
without limitation negligent, willful, unreasonable or unjustifiable
impairment) of any collateral, property or security, at any time existing in
connection with, or assuring or securing payment of, all or any part of the
Crossed Loans.


 


(viii)        The failure of or refusal
of Lender or any other party acting on behalf of Lender to exercise diligence
or reasonable care in the preservation, protection, enforcement, sale or other
handling or treatment of all or any part of such collateral, property or
security, including but not limited to any neglect, delay, omission, failure or
refusal of Lender (A) to take or prosecute any action for the collection of any
of the Crossed Loans, (B) to foreclose, or initiate any action to foreclose,
or, once commenced, prosecute to completion any action to foreclose upon any
security therefor, or (C) to take or prosecute any action in connection with
any instrument or agreement evidencing or securing all or any part of the
Crossed Loans.


 


(ix)           The fact that any
collateral, security, security interest or lien contemplated or intended to be
given, created or granted as security for the repayment of the Crossed Loans,
or any part thereof, shall not be properly perfected or created, or shall prove
to be unenforceable or subordinate to any other security interest or lien, it
being recognized and agreed by Borrower that Borrower is not entering into this
Loan Agreement in reliance on, or in contemplation of the benefits of, the
validity, enforceability, collectibility or value of any of the collateral for
the Crossed Loans.


 


(x)            Any payment by any of
the Crossed Borrowers to Lender is held to constitute a preference under
bankruptcy laws, or for any reason Lender is required to refund such payment or
pay such amount to any of the Crossed Borrowers or someone else.


 


(xi)           Any other action taken
or omitted to be taken with respect to the Crossed Loan Documents, the Crossed
Loans, or the security and collateral therefor.


 


(g)           Notwithstanding
anything to the contrary set forth in this Loan Agreement, Lender may, at its
sole option and in its sole discretion, from time to time (one or more times)
deliver written notice to Borrower stating that this Loan Agreement and the
other Loan Documents shall no longer secure one or more (at Lender’s sole
election) of the Crossed Loans (each a “Cross Release
Notice”), whereupon (i) this Loan Agreement and the other Loan
Documents shall no longer secure any of the Crossed Loans for which a Cross
Release Notice is given (the “Excluded Loan(s)”;
each Crossed Borrower which is the borrower with respect to an Excluded Loan is
herein referred to as an “Excluded Borrower”,
and the Crossed Loan Agreement, Cross Side Agreement and other Crossed Loan
Documents executed and delivered by an Excluded Borrower with respect to the
Excluded Loan made to it are herein referred to as


 


43

















 


the “Excluded Loan Agreement”,
“Excluded Side Agreement” and “Excluded Loan
Documents”, respectively, and the Crossed Property encumbered by the
Excluded Loan Documents is herein referred to as the “Excluded
Property”), (ii) each Cross Guaranty of the Loan executed by each
Excluded Borrower, together with each Cross Guaranty of an Excluded Loan
executed by Borrower (herein collectively referred to as the “Excluded
Guaranties”) shall be deemed automatically terminated and of no further
force or effect, (iii) each reference herein and in the other Loan Documents to
the “Crossed Loans” shall be deemed to exclude the Excluded Loans, (iv) each
reference herein and in the other Loan Documents to the “Crossed Loan
Agreements”,  “Crossed Loan Documents”,
“Crossed Properties”, “Cross Side Agreements” and “Cross Guaranties” shall be
deemed to exclude the Excluded Loan Agreement, the Excluded Loan Documents, the
Excluded Property, the Excluded Side Agreements and the Excluded Guaranties,
respectively, (v) each reference herein and in the other Loan Documents to the
“Crossed Borrower” and the “Crossed Obligors” shall be deemed to exclude each
Excluded Borrower, (vi) the provisions of Section
2.11(e) of this Loan Agreement shall not apply to any Crossed Loans
Collection from any Excluded Borrower or its Excluded Property and Borrower
shall have no obligation or liability on account thereof; and (vii) Borrower
shall no longer be a beneficiary of the covenants and agreements set forth in Section 2.11(e) of each Excluded Loan Agreement,
and Borrower shall have no rights or claims on account of any contribution or
indemnification obligations of any Excluded Borrower under Section 2.11(e) of any Excluded Loan
Agreement.  In addition to and without
limiting the foregoing, Borrower hereby agrees to fully cooperate with Lender,
at Lender’s expense (provided that Borrower shall be entitled to obtain
reimbursement from Lender only for reasonable out of pocket costs and expenses,
including reasonable legal fees and expenses incurred by it, in responding to
Lender’s requirements for cooperation hereunder), if Lender is considering the
termination of the cross collateralization and cross default of the Loan and
Loan Documents with any of the Crossed Loans, including, but not limited to (x)
amending this Loan Agreement and the other Loan Documents as may be required by
Lender to effectuate such termination of the cross collateralization and cross
default provisions thereof, and (y) updating and/or endorsing the title
insurance policies (at Lender’s cost as to additional premium charges, if any)
to reflect the continuation of the first priority lien of this Loan Agreement.


 


(h)           In
the event the Loan is repaid or defeased in full in accordance with the
provisions of this Loan Agreement and the other Loan Documents, then provided
no Event of Default then exists hereunder, and no “Event of Default” (as
defined in any of the Other Crossed Loan Agreements) exists under any of the
Other Crossed Loan Documents, the cross collateralization and cross default of
the Loan and Loan Documents with the Other Crossed Loans shall terminate and
all the Other Crossed Loans shall be deemed Excluded Loans with respect to the
Loan and the provisions of Section 2.11(g)(i)-(vii) above shall become
automatically applicable with respect thereto. 
Notwithstanding the foregoing, the Loan shall remain cross-defaulted and
cross-collateralized with any and all Coterminous Crossed Loans (other than any
Coterminous Crossed Loans which Lender designates as Excluded Loans pursuant to
the provisions of Section 2.11(g) above).


 


(i)            Notwithstanding
the provisions of Section 6.1(j), in the event that cross
collateralization is terminated with respect to the Loan and any Crossed Loan
(which thus becomes an Excluded Loan hereunder), the Master Homesite Lease(s)
relating to the Mortgaged Property may be (and shall be upon Lender’s request)
amended so that it or they are no longer


 


44

















 


cross-defaulted with the master homesite lease(s)
relating to the Excluded Property entered into by the related Excluded
Borrower(s) with the tenant(s) under the Master Homesite Lease(s) (or its or
their affiliate(s)).  Any such amendment
shall be prepared at Lender’s reasonable expense and in form and substance
reasonably satisfactory to Lender.


 


Section 2.12.          Central Cash
Management.


 


(a)           Local Collection Accounts; Collection Account; Deposits to
and Withdrawals from the Collection Account.


 


(i)            On or before the
Closing Date, Lender shall (1) establish on behalf of the Borrower and maintain
with the Collection Account Bank a collection account (the “Collection Account”), which shall be an Eligible
Account with a separate and unique identification number in the name of Lender,
as secured party, or, at Lender’s option, in the name of Borrower for the
benefit of Lender, as secured party, and (2) cause the Collection Account Bank
to deliver to Lender the Collection Account Agreement in form and substance
reasonably acceptable to Lender acknowledging Lender’s security interest in and
sole dominion and control over the Collection Account.  On or before the Closing Date, Borrower may
(x) establish and maintain with one or more financial institutions acceptable
to Lender in its sole reasonable discretion (individually each, and
collectively, the “Local Collection Account Bank”),
one or more local collection accounts for the Mortgaged Property (individually
each, and collectively, the “Local Collection Account”)
and one or more security deposit accounts (other than Master Lease Deposits)
for the Mortgaged Property (individually each, and collectively, the “Security Deposit Account”), each of which shall
be an Eligible Account with a separate and unique identification number and
entitled in the same name as the Collection Account and (y) cause each Local
Collection Account Bank to deliver to Lender a Local Collection Account
Agreement in form and substance reasonably acceptable to Lender acknowledging
Lender’s security interest in and sole dominion and control over each Local
Collection Account and Security Deposit Account; provided that Borrower
may deposit, hold and administer security deposits (other than Master Lease
Deposits) from that portion of the Mortgaged Property, if any, located in North
Carolina in a Security Deposit Account maintained with Bank of America, N.A. or
other financial institution with a North Carolina branch reasonably acceptable
to Lender, which, it is understood, may not execute a Local Collection Account
Agreement, although Borrower shall make commercially reasonable efforts to
obtain such financial institution’s execution and delivery of a Local
Collection Account Agreement.  On the
Closing Date, Borrower shall deposit $279,775.98 in the Security Deposit
Account.  On or before the Closing Date,
Lender shall establish on behalf of Borrower and maintain with the Collection
Account Bank a separate account for Master Lease Deposits (the “Master Lease
Deposit Account”), which shall be an Eligible Account and shall have the
same title as the Collection Account, for the benefit of Lender until the Loan
is paid in full.  On the Closing Date
Borrower shall deposit the amount of the Master Lease Deposits in the Master
Lease Deposit Account.  Subject to Section 2.12(a)(ii), Borrower shall


 


(A)          deposit or cause the
Manager to deposit in the Security Deposit Account (or into the Master Lease
Deposit Account, with respect to Master Lease


 


45

















 


Deposits) not less than one time during each calendar
month all security deposits in the form of Money received from the tenants,
since the date of the previous deposit (or in the case of the initial deposit,
since the Closing Date),


 


(B)           deposit or cause the
Manager to deposit in the Collection Account or Local Collection Account, all
Rents and Money received from Accounts or under Leases and derived from the
Mortgaged Property and all Proceeds thereof, in each case on each Business Day
following the collection and receipt thereof during the first seven (7)
Business Days of each calendar month and not less than once during each
calendar week of such month commencing after such seventh (7th) day,
and


 


(C)           sweep or cause to be
swept by each Local Collection Account Bank all Money on deposit in the Local
Collection Account in excess of $10,000 (which the Local Collection Account
Bank shall be entitled to use to offset any returned items) to the Collection
Account on each Business Day.


 


Borrower shall not have any right to withdraw Money
from the Local Collection Account, the Security Deposit Account, the Master
Lease Deposit Account or the Collection Account, which shall be under the sole
dominion and control, and the “control” within the meaning of Sections 9-104
and 9-106 of the UCC, of Lender; provided,
that notwithstanding the foregoing, so long as an Event of Default has not
occurred and is not continuing (or if an Event of Default has occurred and is
continuing but Borrower is required to return the security deposit in
accordance with applicable Legal Requirements), Borrower may instruct the Local
Collection Account Bank to withdraw from the Security Deposit Account security
deposits (other than Master Lease Deposits) in order to satisfy Borrower’s
obligations to return the same to tenants entitled to them under and in
accordance with the Leases.  Any
disbursement of Master Lease Deposits shall in each case be subject to Lender’s
prior approval and direction, provided that Lender shall authorize, upon
Borrower’s request made not more frequently than on a monthly basis,
disbursements reflecting any reduction in Master Lease Deposits to which the
tenant under the applicable Master Homesite Lease Documentation is
entitled.  In the event of a Lease
default or other occurrence whereby Borrower, as landlord, shall become
entitled to retain any security deposits or apply the same to amounts owed
under the applicable Lease, any such security deposits so retained and/or
applied by Borrower shall, upon such retention or application, be transferred
from the Security Deposit Account to the Local Collection Account or the
Collection Account and treated in the same manner as Rents; provided,
that in the event of a default under the Master Homesite Lease Documentation
entitling the landlord to retain Master Lease Deposits, the Master Lease
Deposits shall not be transferred to the Collection Account and treated as
Rents but instead shall continue to be held in the Master Lease Deposit Account
as additional collateral for the Indebtedness (and the Crossed Indebtedness).  Any such Rents, Money or Proceeds held by
Borrower or the Manager prior to deposit into the Local Collection Account
shall be held in trust for the benefit of Lender.  Borrower shall be responsible for the payment of all costs and
expenses in connection with establishing and maintaining the Collection
Account, the Local Collection Account, the Security Deposit Account, the Master
Lease Deposit Account and the Reserve Accounts (including, without limitation,


 


46

















 


Collection Account Bank’s and Local Collection Account
Bank’s fees and charges) and shall reimburse Lender upon demand for any such
costs or expenses incurred by Lender.


 


(ii)           In the event that any
Event of Default has occurred and is continuing,


 


(A)          upon request of Lender,
Borrower shall deliver to each tenant under a Lease an irrevocable direction
letter in a form approved by Lender requiring the tenant to pay all Rents and
other Money under Leases, and any Money received from Accounts or otherwise
derived from the Mortgaged Property and Proceeds thereof owed to Borrower
directly to the Collection Account or (if Lender elects) a Local Collection
Account and shall deliver an irrevocable direction letter in such form to each
tenant under a new Lease entered into thereafter prior to the commencement of
such Lease,


 


(B)           upon request of Lender,
all Rents and Money received from Accounts or under Leases and derived from the
Mortgaged Property and all Proceeds thereof shall be payable to Lender or as
otherwise directed by Lender,


 


(C)           if a tenant under a
Lease forwards any Rents, Money or Proceeds to Borrower or Manager rather than
directly to the Collection Account or applicable Local Collection Account,
Borrower shall (i) if the Lender has made the request referred to in Section
2,12(a)(ii)(A) above, deliver an additional irrevocable direction letter to the
tenant and make other commercially reasonable efforts to cause the tenant to
thereafter forward such Rents, Money or Proceeds directly to the Collection
Account or (if Lender elects) a Local Collection Account, and (ii) immediately
deposit or cause the Manager to deposit in the Collection Account any such
Rents, Money or Proceeds received by Borrower or Manager,


 


(D)          Borrower shall not have
any right to make or direct any withdrawals from the Collection Account or the
Reserve Account without the prior written consent of Lender (it being
understood and agreed that Borrower may continue to make withdrawals from the
Security Deposit Account as described above), and


 


(E)           any and all funds on
deposit in the Collection Account and the Reserve Accounts may be allocated by
Lender in its sole discretion for the payment of the Indebtedness pursuant to Section 2.8 of this Agreement or to the Operating
Expense Account, the Working Capital Reserve Account or the Debt Service
Reserve Account.


 


(iii)          Borrower shall deposit
in the Collection Account all Loss Proceeds received by Borrower.


 


(b)           Distribution of Cash.  So long as an Event of Default has not occurred and is not
continuing (and thereafter at Lender’s sole option and discretion), Lender
shall apply funds on deposit in the Collection Account (to the extent not held
in Reserve Accounts constituting sub-accounts of the Collection Account, if
any, and with the exception of Loss Proceeds, which


 


47

















 


shall be applied as provided in Section
2.12(e) and Section 5.1(x) of
this Agreement) on each Payment Date as follows:


 


(i)            first,
to the Real Estate Taxes Escrow Account and the Insurance Escrow Account, in
that order, in the respective amounts required to be deposited therein as
described in Section 2.13(b);


 


(ii)           second,
to the payment to Lender of any expenses then due and payable to Lender or its
servicer(s) pursuant to this Agreement or the other Loan Documents;


 


(iii)          third,
to the payment to Lender of the Monthly Debt Service Payment due upon such
Payment Date;


 


(iv)          fourth,
to the Replacement Reserve Account in the amount required to be deposited
therein as described in Section 2.13(a);


 


(v)           fifth,
to the payment of any outstanding indemnification payment to which an
Indemnified Party is then entitled pursuant to Sections
5.1(i) and 5.1(j), and any other
amounts then due and payable to Lender pursuant to this Agreement and the other
Loan Documents which are not paid from applications under clause (iii) above;


 


(vi)          sixth,
to the Prepaid Rent Account in the amount required to be deposited therein as
described in Section 2.13(d);


 


(vii)         seventh, if no
Event of Default exists, to Borrower in an amount equal to remaining available
funds, if any; provided, that if any Event
of Default exists, no disbursement shall be made under this clause seventh; and


 


(viii)        eighth,
if any Event of Default exists, then to the extent Lender has not made other
application of such remaining available funds in Lender’s discretion as
provided hereunder, all remaining available funds shall be allocated as
determined by Lender in Lender’s sole and absolute discretion (and re-allocated
from time to time as Lender may elect) and retained in the Debt Service Reserve
Account, the Working Capital Reserve Account and/or the Operating Expense
Account or, at Lender’s option, in other Lender-controlled accounts.


 


(c)           Permitted Investments.  So long as no Event of Default has occurred and is continuing,
the Collection Account may be an interest-bearing account.  All interest paid or other earnings on funds
deposited into the Collection Account made hereunder shall be deposited into
the Collection Account.  Borrower shall include
all earnings on the Collection Account as income of Borrower for federal and
applicable state tax purposes.


 


(d)           Intentionally Omitted.


 


(e)           Loss Proceeds. 
In the event of a casualty or Taking with respect to the Mortgaged
Property, all of Borrower’s interest in Loss Proceeds shall be paid directly to
the Collection Account.  Subject to the
provisions of Section 5.1(x) of this
Agreement, whereby Loss Proceeds may in certain cases and upon satisfaction of
the terms and conditions set forth in


 


48

















 


Section 5.1(x)
be made available for Restoration, Loss Proceeds may, at Lender’s option
exercised in Lender’s sole discretion, be applied to the Indebtedness and, upon
payment in full of the Indebtedness, to any Crossed Indebtedness or, if an
Event of Default exists, in any manner determined by Lender in Lender’s sole
discretion in accordance with Section 2.8
hereof.  If the Loss Proceeds are to be
made available for Restoration pursuant to Section
5.1(x) of this Agreement, such Loss Proceeds shall be held by Lender
in a segregated interest-bearing Eligible Account in the name of Lender and
under the sole dominion and control of Lender to be opened (if not previously
opened and maintained by the Collection Account Bank under the Collection
Account Agreement by the Lender) by Lender at a financial institution selected
by Lender (the “Loss Proceeds Account”).  Funds on deposit in the Loss Proceeds
Account shall be invested in Permitted Investments (subject to the availability
of such Permitted Investments with the Collection Account Bank) in the same
manner and subject to the same restrictions as set forth in Section 2.12(c) with respect to the Collection
Account (except that the maturity shall be not later than as necessary to
satisfy any schedule of distributions for Restoration required or approved by
Lender).  If any Loss Proceeds are
received by Borrower, such Loss Proceeds shall be received in trust for Lender,
shall be segregated from other funds of Borrower, and shall be forthwith paid
to Lender to the extent necessary to comply with this Agreement.


 


Section 2.13.          Reserve Accounts.


 


(a)           Deferred Maintenance Escrow Account and Replacement Reserve
Account.


 


(i)            On or before the
Closing Date, Lender shall establish on behalf of Borrower and maintain with
the Collection Account Bank two separate accounts for deferred maintenance and
replacement reserves, each of which shall be an Eligible Account and shall have
the same title as the Collection Account, for the benefit of Lender until the
Loan is paid in full.  The two accounts
shall be designated the “Deferred Maintenance Escrow Account” (the “Deferred Maintenance Escrow Account”) and the
“Replacement Reserve Account” (the “Replacement
Reserve Account”).  On the Closing
Date, Lender shall deposit out of the Loan proceeds $23,087.50 in the Deferred
Maintenance Escrow Account and $6,154.17 in the Replacement Reserve
Account.  On each Payment Date,
commencing with the April 2004 Payment Date, Borrower shall deposit from the
Collection Account (or if the funds for such deposit are not available pursuant
to Section 2.12(b), shall make an
additional deposit of Borrower’s funds sourced from equity capital
contributions) to the Replacement Reserve Account, of an amount equal to the
Replacement Reserve Deposit Amount until the amount on deposit in the
Replacement Reserve Account equals the Replacement Reserve Threshold Amount for
the initial time.  During the period
commencing on the April 2004 Payment Date when such deposits are being made to
the Replacement Reserve Account until the funds on deposit therein equal the
Replacement Reserve Threshold Amount for the initial time, no withdrawals may
be made from the Replacement Reserve Account. 
After the amount on deposit in the Replacement Reserve Account equals
the Replacement Reserve Threshold Amount for the initial time, the Borrower may
request withdrawals from the Replacement Reserve Account pursuant to the
procedure set forth in Section 2.13(a)(iii) below.  In the event following such withdrawal, the
amount on deposit in the Replacement Reserve Account shall be less than the
Replacement Reserve Threshold Amount then on each


 


49

















 


subsequent Payment Date Borrower shall deposit from
the Collection Account (or if the funds for such deposit are not available
pursuant to Section 2.12(b), shall make an additional deposit of
Borrower’s funds sourced from equity capital contributions) to the Replacement
Reserve Account, of an amount equal to the Replacement Reserve Deposit Amount
until the amount on the deposit in the Replacement Reserve Account once again
equals the Replacement Reserve Threshold Amount (following which event the
Borrower shall once again not be obligated to make deposits to the Replacement
Reserve Account).


 


(ii)           Any and all Moneys
remitted to the Deferred Maintenance Escrow Account, together with any
interest, earnings or income earned thereon, shall be held in the Deferred
Maintenance Escrow Account to be withdrawn by Lender upon written request of
Borrower made not more than once each month in an amount not less than $10,000,
and applied to pay directly or reimburse Borrower for repairs set forth on Schedule 1 attached hereto (the “Immediate Repairs”) upon satisfaction of the
disbursement conditions listed on Schedule 6
hereof.  Within the applicable time
period(s) for completion set forth on Schedule 1,
Borrower shall complete such Immediate Repairs and shall provide to Lender such
documentation, and other evidence of compliance with law as Lender may
reasonably require. The funds contained in the Deferred Maintenance Escrow
Account shall be utilized by Borrower solely for performance of the Immediate
Repairs in accordance with the Property Condition Assessments and Environmental
Reports, and shall not be used by Borrower for purposes for which any other
Reserve Account is established. Upon written application of Borrower (which may
be done by electronic mail or e-mail), Borrower shall be entitled to obtain
disbursements by Lender from the Deferred Maintenance Escrow Account to pay
costs incurred by Borrower for such Immediate Repairs, provided that (a) no
Event of Default has occurred and is continuing, (b) Borrower shall provide to
Lender (including electronic mail or e-mail) such documentation and
certifications as Lender may reasonably request to substantiate the requirement
for and entitlement to such disbursement, (c) Borrower shall provide to Lender
(including by electronic mail or e-mail) with all invoices, receipts, lien
waivers and other documentation of lawful and workmanlike progress or
completion, lien-free status, and availability of sufficient funds, all as may
be reasonably requested by Lender, and (d) Borrower shall provide Lender such
evidence as may be reasonably satisfactory to Lender that after payment of any
draw for Immediate Repairs, the funds remaining in the Deferred Maintenance
Escrow Account shall be sufficient to pay for the remainder of such Immediate
Repairs.   In the event Borrower
completes the repairs for which funds were reserved in the Deferred Maintenance
Escrow Account to the reasonable satisfaction of Lender, Lender shall disburse
any and all amounts then on deposit in the Deferred Maintenance Escrow Account
to the Collection Account.


 


(iii)          Subject to the
provisions of Section 2.13(a)(i), any and all Moneys remitted to the
Replacement Reserve Account, together with any interest, earnings or income
thereon, shall be held in the Replacement Reserve Account to be withdrawn by
Lender upon written request of Borrower made not more than once each month in
an amount not less than $10,000, and applied to reimburse Borrower for Capital
Improvement Costs (other than those for Immediate Repairs) reasonably approved
by Lender for disbursements from the Replacement Reserve (“Approved Capital


 


50

















 


Expenditures”)
upon satisfaction of the disbursement conditions listed on Schedule 6 hereof, provided that funds in the
Replacement Reserve Account shall not be used by Borrower for purposes for
which any other Reserve Account is established.


 


(b)           Real Estate Taxes Escrow Account and Insurance Escrow
Account.  On or before the
Closing Date, Lender shall on behalf of the Borrower establish and maintain
with the Collection Account Bank two separate accounts for Basic Carrying
Costs, each of which shall be an Eligible Account and shall have the same title
as the Collection Account for the benefit of Lender until the Loan is paid in
full.  The two accounts shall be designated
the “Real Estate Taxes Escrow Account” (the “Real
Estate Taxes Escrow Account”) and the “Insurance Escrow Account”
(the “Insurance Escrow Account”).  On the Closing Date, the Lender shall
deposit out of the Loan proceeds $82,279.84 in the Real Estate Taxes Escrow
Account and $20,770.93 in the Insurance Escrow Account (i.e. the amount
necessary to meet the first bill with credit for existing monthly escrow
payments made prior to the applicable due date).  With respect to each Payment Date, Borrower shall deposit from
the Collection Account (or, if the funds for such deposit are not available
pursuant to Section 2.12(b), shall make an
additional deposit of Borrower’s funds sourced from equity capital
contributions),


 


(1)           an
amount equal to (1/12th) one-twelfth of the annual real estate taxes
and any other Impositions that if not paid in a timely manner will result in a
Lien on a Mortgaged Property in the Real Estate Taxes Escrow Account,


 


(2)           an
amount equal to one-twelfth (1/12th) of the annual insurance
premiums for policies of insurance required to be maintained by Borrower with
respect to the Mortgaged Property pursuant to this Agreement, and any
additional insurance required under any of the other Loan Documents, in the
Insurance Escrow Account.


 


Any and all Moneys remitted to the Real Estate Taxes
Escrow Account or Insurance Escrow Account (which shall not bear interest for
the benefit of Borrower) shall be held in the Real Estate Taxes Escrow Account
or Insurance Escrow Account to be withdrawn from the Real Estate Taxes Escrow
Account or Insurance Escrow Account, as applicable, by Lender or its servicer
upon written request of Borrower delivered to Lender and its servicer together
with documentation and other evidence (including invoices and in the case of a
reimbursement of Borrower, evidence that the related costs have been paid) with
respect to the respective Basic Carrying Costs towards which such funds are to
be applied, and applied to pay directly (or reimburse Borrower, in the case of
insurance premiums only) for (x) any Impositions (in the case of the Real
Estate Taxes Escrow Account) or (y) any insurance premiums for policies of
insurance required to be maintained by Borrower with respect to the Mortgaged
Property pursuant to this Agreement, and any additional insurance required
under any of the other Loan Documents (in the case of the Insurance Escrow
Account).  Borrower shall provide Lender
or its servicer with bills and other documents necessary for payment of
Impositions and insurance premiums at least ten (10) Business Days prior to the
due dates therefor.  In the event the
amount on deposit in the Real Estate Taxes Escrow Account or the Insurance
Escrow Account exceeds the amount due for Impositions by more than one-twelfth
(1/12th) of the annual real estate taxes (in the case of the Real
Estate Taxes Escrow Account) or the amount due for insurance premiums (in the
case of the Insurance Escrow Account), respectively, Lender or its servicer
shall in its


 


51

















 


sole discretion credit such excess against future
payment obligations to the Real Estate Taxes Escrow Account or the Insurance
Escrow Account, as applicable.


 


(c)           Operating Expense Account, Working Capital Reserve Account
and the Debt Service Reserve Account.  On or before the Closing Date, Lender shall on behalf of the
Borrower establish and maintain with the Collection Account Bank three accounts
for the remittance of funds by Lender or its servicer in its sole discretion
after an Event of Default has occurred and is continuing, each of which shall
be an Eligible Account and shall have the same title as the Collection Account
for the benefit of Lender until the Loan is paid in full.  The three accounts shall be designated the
“Operating Expense Account” (the “Operating Expense
Account”), the “Working Capital Reserve Account” (the “Working Capital Reserve Account”) and the “Debt
Service Reserve Account” (the “Debt Service Reserve
Account”).  On any Business
Day after the occurrence and during the continuance of an Event of Default,
Lender or its servicer may in its sole discretion deposit into the Operating
Expense Account, the Working Capital Reserve Account or the Debt Service
Reserve Account any funds then on deposit in the Local Collection Account or
the Collection Account.  Any and all
Moneys remitted to the Operating Expense Account, the Working Capital Reserve
Account or the Debt Service Reserve Account shall, until otherwise applied by
Lender from time to time at Lender’s sole discretion during the existence of
any Event of Default, be held in the Operating Expense Account, the Working
Capital Reserve Account or the Debt Service Reserve Account, as applicable, and
applied, if Lender elects in its sole discretion to make such funds available
for such application,


 


(x)            with
respect to the Operating Expense Account only, to pay Property Expenses
provided for in the Operating Budget approved by Lender, or for other Property
Expenses approved by Lender,


 


(y)           with
respect to the Working Capital Reserve Account only, as a working capital
reserve up to the then applicable Working Capital Reserve Amount, as the same
adjusts from time to time under the then applicable Working Capital Budget, or
in such greater or lesser amount as Lender may determine from time to time,
with disbursements from time to time at Lender’s option from the Working
Capital Reserve Account to the Operating Expense Account as working capital
needs arise which may not be satisfied from the funds on hand in the Operating
Expense Account, all at the sole election of Lender, and


 


(z)            with
respect to the Debt Service Reserve Account only, applied to pay the
Indebtedness at the sole election of Lender;


 


provided,
that (1) notwithstanding the foregoing, Lender may at any time, in its sole
discretion, elect to apply the funds on deposit in the Operating Expense
Account and/or the Working Capital Reserve Account to pay the Indebtedness
(including without limitation any Prepayment Consideration and other amounts
due Lender in connection with such prepayment) and any Crossed Indebtedness
while any Event of Default exists, and (2) in the event Lender accepts in
writing a proposed cure of the Event of Default which precipitated the deposits
to the Operating Expense Account, the Working Capital Reserve Account and the
Debt Service Reserve Account and no other Event of Default exists, then the
funds on deposit in the Operating Expense


 


52

















 


Account, the Working Capital Reserve Account and the
Debt Service Reserve Account shall be released to Borrower.


 


(d)           Prepaid
Rent Account.  On or before the
Closing Date, Lender shall on behalf of the Borrower establish and maintain
with the Collection Account Bank an account for the remittance of prepaid Rent designated
the Prepaid Rent Account (the “Prepaid Rent Account”) which shall be an
Eligible Account and shall have the same title as Collection Account for the
benefit of the Lenders until the Loan is paid in full.  On the Closing Date, the initial Lender shall
deposit out of the Loan proceeds $0.00 in the Prepaid Rent Account, which shall
be an estimate of prepaid Rent held by Borrower.  At least five (5) Business Days prior to the First Payment Date,
Borrower will provide to Lender a certified prepaid rent roll in the form
attached as Schedule 9 showing the amount of prepaid Rent held by
Borrower, and the amount of the prepaid Rent deposited in the Prepaid Rent
Account shall be adjusted accordingly on the First Payment Date, by a transfer
of funds between the Collection Account and the Prepaid Rent Account.  On any Payment Date as of which the most
recent Monthly Statement indicates that the prepaid Rent exceeds $15,000,
Lender shall deposit or cause to be deposited in the Prepaid Rent Account
pursuant to clause sixth of Section 2.12(b) an amount equal to the positive
difference, if any, between the amount indicated in the Monthly Statement and
the amount then on deposit in the Prepaid Rent Account.  On any Payment Date as of which the most
recent Monthly Statement indicates that the prepaid Rent exceeds $15,000 but is
less than the amount then on deposit in the Prepaid Rent Account, the Lender
shall withdraw from the Prepaid Rent Account and transfer to the Collection
Account the positive difference between the amount on deposit in the Prepaid
Rent Account and such amount contained in the most recent Monthly Statement to
be applied together with the other collections from the Mortgaged Properties
pursuant to Section 2.12(b) on such Payment Date.  On any Payment Date as of which the most recent Monthly Statement
indicates that the prepaid Rent which was previously in excess of $15,000 has
been reduced below $15,000, the Lender shall withdraw from the Prepaid Rent
Account and transfer to the Collection Account the entire amount of funds then
on deposit in the Prepaid Rent Account to be applied together with the other
collections from the Mortgaged Properties pursuant to Section 2.12(b) on such
Payment Date.  In the event of and after
a release of a Mortgaged Property, all of the references above in this
paragraph to $15,000 shall be adjusted to equal one-twelfth (1/12th) of the
product of 7.70% and the Underwritten Net Cash Flow of all of the remaining
Mortgaged Properties.


 


(e)           Investment of Funds.  All or a portion of any Moneys in the Reserve Accounts (other
than the Real Estate Tax Escrow Account, the Insurance Escrow Account, the
Operating Expense Account, the Working Capital Reserve Account and the Debt
Service Reserve Account, none of which shall bear interest for the benefit of
Borrower) shall, so long as no Event of Default has occurred and is continuing,
be held in interest-bearing accounts. 
All interest paid or other earnings on funds deposited into the Reserve
Accounts made hereunder shall be deposited into the Reserve Accounts (other
than with respect to the Real Estate Taxes Escrow Account and the Insurance
Escrow Account for which Lender and its servicer shall not have any obligation
to deposit such interest or earnings into such accounts).  Lender shall have no liability for any loss
in investments of funds in any Reserve Account that are invested in Permitted
Investments and no such loss shall affect Borrower’s obligation to fund, or
liability for funding, the Reserve Accounts. 
Unless and until title to the funds therein shall have vested in


 


53

















 


any Person other than Borrower, Borrower shall include
all such income or gain on any account of the Reserve Account as income of
Borrower for federal and applicable state tax purposes.


 


(f)            Event of Default.  After an Event of Default has occurred and is continuing,
Borrower shall not be permitted to make any withdrawal(s) from any Pledged
Accounts and Lender may liquidate any Permitted Investments of the amount on
deposit in such account, withdraw and use such amount on deposit in the Pledged
Accounts to make payments on account of the Indebtedness, any Crossed
Indebtedness or otherwise as provided in Section 2.8.  Without in any way limiting the foregoing or
Lender’s rights and remedies upon an Event of Default, and subject to Lender’s
direction otherwise from time to time, in whole or in part, in Lender’s sole
and absolute discretion, after and during the continuance of an Event of
Default Lender may direct the Collection Account Bank or the Local Collection
Account Bank to disburse to Lender or allocate all available funds on deposit
in the Pledged Accounts to: (a) any debt service or other Indebtedness due
under this Loan Agreement or the other Loan Documents; (b) any Crossed
Indebtedness; (c) any Reserve Account established under this Loan Agreement;
(d) otherwise as a reserve for Property Expenses, Capital Improvement Costs,
Impositions and other expenditures relating to the use, management, operation
or leasing of the Mortgaged Property; and/or (e) any costs and expenses
incurred by Lender in connection with such Event of Default, or expended by
Lender to protect or preserve the value of the Mortgaged Property.


 


Section 2.14.          Additional
Provisions Relating to the Pledged Accounts.


 


(a)           Borrower
covenants and agrees that:  (i) all
securities or other property underlying any financial assets credited to any
Pledged Account shall be registered in the name of Lender, indorsed to Lender
or indorsed in blank or credited to another securities account maintained in
the name of Lender and in no case will any financial asset credited to any
Pledged Account be registered in the name of Borrower, payable to the order of
Borrower or specially indorsed to Borrower except to the extent the foregoing
have been specially indorsed to Lender or in blank; and (ii) all Permitted
Investments and all other property delivered to Lender pursuant to this
Agreement will be promptly credited to one of the Pledged Accounts.


 


(b)           Borrower
hereby agrees that each item of property (whether investment property,
financial asset, security, instrument, cash or otherwise) credited to any
Pledged Account shall be treated as a “financial asset”  within the meaning of Section 8-102(a)(9) of
the UCC.


 


(c)           Borrower
acknowledges and agrees that the Collection Account Bank and Local Collection
Account Bank shall comply with all “entitlement orders” (i.e. an order
directing transfer or redemption of any financial asset relating to a Pledged
Account, and any “entitlement order” as defined in Section 8-102(a)(8) of the
UCC) and instructions (including any “instruction” within the meaning of
Section 9-104 of the UCC) originated by Lender without further action or
consent by Borrower, Manager or any other Person.


 


(d)           Regardless
of any provision in any other agreement, for purposes of the UCC, with respect
to each Pledged Account, New York shall be deemed to be the bank’s jurisdiction
(within the meaning of Section 9-304 of the UCC) and the securities intermediary’s


 


54

















 


jurisdiction (within the meaning of Section 8-110 of
the UCC). The Pledged Accounts shall be governed by the laws of the State of
New York.


 


(e)           Except
for the claims and interest of Lender and of Borrower in the Pledged Accounts,
Borrower represents and warrants that it does not know of any Lien on or claim
to, or interest in, any Pledged Account or in any “financial asset” (as defined
in Section 8-102(a) of the UCC) credited thereto.  If any Person asserts any Lien, encumbrance or adverse claim
(including any writ, garnishment, judgment, warrant of attachment, execution or
similar process) against the Pledged Accounts or in any financial asset carried
therein, Borrower will promptly notify Lender thereof and shall indemnify,
defend and hold Lender and each of the Indemnified Parties harmless from and
against any such Lien, encumbrance or claim.


 


Section 2.15.          Security Agreement.


 


(a)           Pledge of Pledged Accounts.  To secure the full and punctual payment and
performance of all of the Indebtedness and Crossed Indebtedness, Borrower
hereby assigns, conveys, pledges and transfers to Lender, as secured party, and
grants Lender a first and continuing security interest in and to, the following
property, whether now owned or existing or hereafter acquired or arising and
regardless of where located (collectively, the “Account
Collateral”):


 


(i)            all of Borrower’s
right, title and interest in the Pledged Accounts and all Money and Permitted
Investments, if any, from time to time deposited or held in the Pledged
Accounts or purchased with funds or assets on deposit in the Pledged Accounts;


 


(ii)           all of Borrower’s
right, title and interest in interest, dividends, Money, Instruments and other
property from time to time received, receivable or otherwise payable in respect
of, or in exchange for, any of the foregoing until such time as such items are
disbursed from the Pledged Accounts; and


 


(iii)          to the extent not
covered by clause (i) or (ii) above, all Proceeds of any or all of the
foregoing until such time as such items are disbursed from the Pledged
Accounts.


 


Lender and Collection Account Bank and Local
Collection Account Bank, each as agent for Lender, shall have with respect to
the foregoing collateral, in addition to the rights and remedies herein set
forth, all of the rights and remedies available to a secured party under the
UCC, as if such rights and remedies were fully set forth herein.


 


(b)           Covenants; Sole Dominion and Control.  So long as any portion of the Indebtedness
or Crossed Indebtedness is outstanding, Borrower shall not open any account
other than the Local Collection Account for the deposit of Rents or Money
received from Accounts or under Leases and derived from the Mortgaged Property
and all Proceeds to pay amounts owing hereunder, other than any account for
amounts required by law to be segregated by Borrower.  Borrower shall not have any right to withdraw Money from the
Pledged Accounts.  Borrower acknowledges
and agrees that the Pledged Accounts are and shall at all times continue to be
subject to and under the sole dominion and control, and the “control” within
the meaning of Sections 9-104 and 9-106 of the UCC, of Lender.  Notwithstanding anything set forth herein to


 


55

















 


the contrary, neither Borrower nor Manager nor any
other person or entity, through or under Borrower, shall have any control over
the use of, or any right to withdraw any amount from, any Pledged Accounts, and
Borrower acknowledges that the Collection Account Bank and the Local Collection
Account Bank shall comply with all instructions originated by Lender without
further consent by Borrower.  Borrower
acknowledges and agrees that the Collection Account Bank and Local Collection
Account Bank shall comply with the instructions of Lender with respect to the
Pledged Accounts without the further consent of Borrower or Manager.  The Account Collateral shall be subject to
such applicable laws, and such applicable regulations of the Board of Governors
of the Federal Reserve System and of any other banking authority or
Governmental Authority, as may now or hereafter be in effect, and to the rules,
regulations and procedures of the financial institution where the Account
Collateral is maintained relating to demand deposit accounts generally from
time to time in effect.


 


(c)           Financing Statements; Further Assurances.  Borrower hereby irrevocably authorizes
Lender at any time and from time to time to file any financing statements or
continuation statements, and amendments to financing statements, in any
jurisdictions and with any filing offices as Lender may determine, in its sole
discretion, are necessary or advisable to perfect the security interests
granted to Lender in connection herewith. 
Such financing statements may describe the collateral in the same manner
as described in any security agreement or pledge agreement entered into by the
parties in connection herewith or may contain an indication or description of
collateral that describes such property in any other manner as Lender may
determine, in its sole discretion, is necessary, advisable or prudent to ensure
the perfection of the security interest in the collateral granted to Lender in
connection herewith, including, without limitation, describing such property as
“all assets” or “all personal property” of Borrower whether now owned or
hereafter acquired.  From time to time,
at the expense of Borrower, Borrower shall promptly execute and deliver all
further instruments, and take all further action, that Lender may reasonably
request, in order to continue the perfection and protection of the pledge and
security interest granted or purported to be granted hereby.


 


(d)           Transfers and Other Liens.  Borrower shall not sell or otherwise dispose
of any of the Account Collateral other than pursuant to the terms of this
Agreement and the other Loan Documents, or create or permit to exist any Lien
upon or with respect to all or any of the Account Collateral, except for the
Lien granted to Lender under or as contemplated by this Agreement.


 


(e)           No Waiver. 
Every right and remedy granted to Lender under this Agreement or by law
may be exercised by Lender at any time and from time to time, and as often as
Lender may deem it expedient.  Any and
all of Lender’s rights with respect to the pledge of and security interest in
the Account Collateral granted hereunder shall continue unimpaired, and to the
extent permitted by law, Borrower shall be and remain obligated in accordance
with the terms hereof, notwithstanding (i) any proceeding of Borrower under the
United States Bankruptcy Code or any bankruptcy, insolvency or reorganization
laws or statutes of any state, (ii) the release or substitution of Account
Collateral at any time, or of any rights or interests therein or (iii) any
delay, extension of time, renewal, compromise or other indulgence granted by
Lender in the event of any Default with respect to the Account Collateral or
otherwise hereunder.  No delay or extension
of time by Lender in exercising any power of sale, option or other right or
remedy hereunder, and no notice or demand which may be given to or made upon
Borrower by


 


56

















 


Lender, shall constitute a waiver thereof, or limit,
impair or prejudice Lender’s right, without notice or demand, to take any
action against Borrower or to exercise any other power of sale, option or any
other right or remedy.


 


(f)            Lender Appointed Attorney-In-Fact.  Borrower hereby irrevocably constitutes and
appoints Lender as Borrower’s true and lawful attorney-in-fact, with full power
of substitution, at any time after the occurrence and during the continuation
of an Event of Default, to execute, acknowledge and deliver any instruments and
to exercise and enforce every right, power, remedy, option and privilege of
Borrower with respect to the Account Collateral, and do in the name, place and
stead of Borrower, all such acts, things and deeds for and on behalf of and in
the name of Borrower with respect to the Account Collateral, which Borrower
could or might do or which Lender may deem necessary or desirable to more fully
vest in Lender the rights and remedies provided for herein with respect to the
Account Collateral and to accomplish the purposes of this Agreement.  The foregoing powers of attorney are
irrevocable and coupled with an interest and shall terminate upon repayment of
the Indebtedness and all Crossed Indebtedness in full.


 


(g)           Continuing Security Interest; Termination.  This Section 2.15
shall create a continuing pledge of and security interest in the Account
Collateral and shall remain in full force and effect until payment in full by
Borrower of the Indebtedness and the payment in full of all Crossed
Indebtedness.  Upon payment in full by
Borrower of the Indebtedness and payment in full of all Crossed Indebtedness,
Lender shall return to Borrower such of the Account Collateral as shall not
have been applied pursuant to the terms hereof, and shall execute such
instruments and documents as may be reasonably requested by Borrower to
evidence such termination and the release of the pledge and lien hereof.


 


Section 2.16.          Mortgage Recording
Taxes.  The Lien to be
created by the Mortgages is intended to encumber the Mortgaged Property to the
full extent of the Loan Amount; provided, that, notwithstanding the
foregoing, with respect to any Mortgaged Property located in a state that
imposes mortgage recording taxes where the imposition of a lower amount would
allow tax savings to the Borrower, the Lien to be created by the related
Mortgage is intended to encumber the Mortgaged Property in an amount acceptable
to the Lender which amount shall in no event be less than 125% of the value of
the Mortgaged Property as determined by the Lender Appraisals.  On the Closing Date, Borrower shall have
paid all state, county and municipal recording and all other taxes imposed upon
the execution and recordation of the Mortgages, if any.


 


Section 2.17.          Partial Release.  After the First Open Defeasance Date and
prior to the First Open Payment Date, and provided no Event of Default exists,
Borrower may from time to time obtain a partial release (a “Partial Release”)
from the lien of the Mortgage and the Loan Documents of up to two of the
individual Mortgaged Properties listed on Schedule 2.17 hereto (each
such individual Mortgaged Property to be released, a “Partial Release
Property”), provided that all of the following conditions precedent have
been satisfied with respect to any such Partial Release of any such Partial
Release Property:


 


(a)           No
Partial Release of a Partial Release Property will be permitted until after the
First Open Defeasance Date or if any Event of Default has occurred and is
continuing.


 


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No Partial Release of the Partial Release Property
will be permitted on or after the First Open Payment Date.  No more than two Partial Release Properties
may be released during the term of the Loan.


 


(b)           No
Partial Release of the Partial Release Parcel will be permitted unless Borrower
establishes to Lender’s satisfaction that the Debt Service Coverage Ratio for
the remainder of the Mortgaged Property (i.e., exclusive of any income from the
Partial Release Property) is and shall continue to be equal to or greater than
the greater of (i) the Debt Service Coverage Ratio for the Mortgaged Property
calculated immediately prior to the Partial Release (i.e., inclusive of the
income from the Partial Release Property), and (ii) 1.30:1.00.  If the foregoing condition would not be
satisfied by defeasance of the Partial Defeasance Amount indicated in
subparagraph (e) below, Borrower may by written notice to Lender given not less
than ten (10) days prior to the Partial Defeasance increase the Partial
Defeasance Amount to an amount which would result in the foregoing condition
being satisfied upon completion of the Partial Defeasance of such larger
Partial Defeasance Amount.  No Partial
Defeasance, nor any increase in any Partial Defeasance Amount under this
paragraph (b) or paragraphs (c) below, shall affect the allocated loan amounts
for the remaining Mortgaged Property as set forth on Schedule 2.17.


 


(c)           No
Partial Release of the Partial Release Parcel will be permitted unless Borrower
establishes to Lender’s satisfaction that the value of the remainder of the
Mortgaged Property (as determined by then-current Appraisals prepared by
Appraisers approved by Lender, the fees and expenses of which shall be paid by
Borrower) is sufficient to satisfy a loan-to-value ratio (based on the
outstanding principal balance of the Loan immediately prior to the Partial
Release, less the allocated loan amount for the Partial Release Property) which
is the lesser of (i) 75% and (ii) the loan-to-value ratio for the Mortgaged
Property (inclusive of the Partial Release Property, and based on the
outstanding principal balance of the Loan immediately prior to the Partial
Release) calculated immediately prior to the Partial Release.  If the foregoing condition would not be
satisfied by defeasance of the Partial Defeasance Amount indicated in
subparagraph (e) below, Borrower may by written notice to Lender given not less
than ten (10) days prior to the Partial Defeasance increase the Partial
Defeasance Amount to an amount which would result in the foregoing condition
being satisfied upon completion of the Partial Defeasance of such larger
Partial Defeasance Amount.


 


(d)           The
Partial Release shall be allowed only in connection with a bona fide all-cash sale of the Partial
Release Parcel to an unaffiliated third party on arms-length terms and
conditions, and upon closing of such sale (and thereafter) shall not be owned,
purchased or acquired by Borrower or any Affiliate of Borrower.


 


(e)           Borrower
will on the date of the Partial Release (the “Partial Release Date”)
complete a Partial Defeasance, pursuant to Section 2.7 hereof, of a
portion of the Loan (the “Partial Defeasance Amount” for such Partial
Release Property) equal to 125% of the allocated loan amount for the Partial
Release Property set forth on Schedule 2.17 hereto; provided, that
if Borrower elects in connection with a Partial Defeasance of a Partial Release
Property to increase the Partial Defeasance Amount for such Partial Release
Property pursuant to the provisions of paragraphs (b) and/or (c) above, the
Partial Defeasance Amount for such Partial Release Property shall be such
higher amount for purposes of such Partial Defeasance.


 


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(f)            Borrower
will execute (and Guarantor will consent in writing thereto and reaffirm their
obligations under the Loan Documents to which they are a party notwithstanding
the Partial Release) and deliver all such amendments to the Loan Documents and
other instruments or documents as may be required by Lender (using commercial
standards customarily applied with respect to mortgage loans such as the Loan)
in order to continue to fully protect Lender’s lien and security interest in
the remainder of the Mortgaged Property.


 


(g)           Borrower
will cause the Master Homesite Lease(s) to be amended to exclude the Partial
Release Property pursuant to documentation reasonably satisfactory to Lender.


 


(h)           Borrower,
at its sole cost and expense, shall obtain endorsements to Lender’s loan policy
of title insurance satisfactory in form and content to Lender, which endorsements
will (a) affirmatively evidence the continued validity of Lender’s first lien
position created by the Loan Documents through the date of recordation of the
partial release of the Partial Release Property, and (b) insure that the lien
created by the Loan Documents remains a valid first lien on the remainder of
the Mortgaged Property.


 


(i)            Borrower
shall pay for the costs of preparing and recording partial releases, UCC-3
releases, and any loan modification documents, easements, declarations, and/or
restrictive covenants required by Lender, Lender’s reasonable attorneys’ fees
and costs, all survey charges and costs, all title premiums and costs,
documentary stamps incurred in connection with the release of the Partial
Release Property in accordance with the requirements contained herein, and all
other reasonable out-of-pocket costs, fees, and expenses incurred by Lender in
connection with the requested release of the Partial Release Property.


 


(j)            Borrower
shall have provided Lender with a Rating Confirmation with respect to the
Partial Release.


 


(k)           Borrower
shall pay Lender’s reasonable costs and expenses in connection with the Partial
Release, as set forth below.


 


Borrower shall pay or reimburse Lender for all reasonable costs and
expenses incurred by Lender in connection with such request for a Partial
Release, including, but not limited to, the preparation, negotiation and review
of any and all materials required to be provided in connection therewith
(including Lender’s reasonable attorneys’ fees and expenses).


 


Section 2.18.          Laundry Leases.  Certain laundry facilities at certain of the
Mortgaged Properties have been leased to laundry operators under laundry room
or laundry facility leases (the “Laundry Leases”).  Borrower covenants and agrees that it shall,
within sixty (60) days after the date hereof (or such longer time as Lender may
determine to provide to Borrower at Lender’s sole option) provide copies of
such Laundry Leases to Lender and, if such Laundry Leases are not by their
terms subordinate to the applicable Mortgages, Borrower shall, within sixty
(60) days after the date hereof (or such longer time as Lender may determine to
provide to Borrower at Lender’s sole option) either provide executed
subordination agreements subordinating the Laundry Leases to the applicable
Mortgages or demonstrate to Lender’s


 


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reasonable satisfaction that the Laundry Leases may be
terminated by the landlord thereunder at a cost per Laundry Lease of not more
than $10,000.


 


ARTICLE III.

CONDITIONS PRECEDENT


 


Section 3.1.            Conditions
Precedent to Closing.  The
obligation of the Lender to make the Loan is subject to the satisfaction by
Borrower (and Guarantor, where applicable) or waiver by Lender in writing of the
following conditions no later than the Closing Date:


 


(a)           Loan Agreement. 
Borrower and Lender shall have executed and delivered this Agreement.


 


(b)           Note. 
Borrower shall have executed and delivered to Lender the Note.


 


(c)           Environmental Indemnity Agreement; Guaranty of Non-Recourse
Obligations.  Borrower and
Guarantor shall have executed and delivered the Environmental Indemnity
Agreement to Lender.  Guarantor shall
have executed and delivered the Guaranty of Non-Recourse Obligations.


 


(d)           Opinions of Counsel.  Lender shall have received from counsel to Borrower, the Member
and the Guarantor, legal opinions in form and substance acceptable to Lender,
with respect to corporate matters and with respect to substantive non-consolidation
of Affordable Residential Communities LP, the Member and the Manager, on the
one hand, and Borrower, on the other, in the event of the bankruptcy of
Affordable Residential Communities LP, the Member or the Manager.  Such legal opinions shall be addressed to
Lender and its successors and assigns, dated the Closing Date, and in form and
substance reasonably satisfactory to Lender and its counsel.


 


(e)           Organizational Documents.  Lender shall have received with respect to
each of Borrower, the Member and the Guarantor its certificate of formation,
certificate of limited partnership or certificate of incorporation, as
applicable, as amended, modified or supplemented to the Closing Date, as filed
with the Secretary of State in the jurisdiction of organization and in effect
on the Closing Date and certified to be true, correct and complete by the
appropriate Secretary of State as of a date not more than thirty (30) days
prior to the Closing Date, together with a good standing certificate from such
Secretary of State dated not more than thirty (30) days prior to the Closing
Date and, for Borrower and the Member to the extent required by applicable law,
a good standing certificate from the Secretaries of State (or the equivalent
thereof) of each other State in which Borrower or the Member is required to be
qualified to transact business, each dated not more than thirty (30) days prior
to the Closing Date.


 


(f)            Certified Resolutions, etc.  Lender shall have received a certificate of
each of Borrower, the Member and the Guarantor dated the Closing Date,
certifying (i) the names and true signatures of its incumbent officers
authorized to sign the Loan Documents to which Borrower, the Member or the
Guarantor is a party, (ii) the Organizational Agreement of each of Borrower,
the Member and Guarantor, in each case as in effect on the Closing Date, (iii)
the resolutions of each of Borrower, the Member and the Guarantor, approving
and authorizing the


 


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execution, delivery and performance of the Loan
Documents to which it is a party, and (iv) that there have been no changes in
any Organizational Agreement since the date of execution or preparation
thereof.


 


(g)           Additional Matters.  Lender shall have received such other certificates, opinions,
documents and instruments relating to the Loan as may have been reasonably
requested by Lender.  All corporate and
other organizational proceedings, all other documents (including, without
limitation, all documents referred to herein and not appearing as exhibits
hereto) and all legal matters in connection with the Loan shall be reasonably
satisfactory in form and substance to Lender in its sole and absolute
discretion.


 


(h)           Transaction Costs.  Borrower shall have paid all Transaction Costs for which bills
have been submitted in accordance with the provisions of Section
8.23.


 


(i)            No Default or Event of Default.  No event which would constitute either a
Default or Event of Default under this Agreement or the other Loan Documents
shall have occurred and be continuing on the Closing Date.


 


(j)            No Injunction. 
No law or regulation shall have been adopted, no order, judgment or
decree of any Governmental Authority shall have been issued, and no litigation
shall be pending or threatened, which in the good faith judgment of Lender
would enjoin, prohibit or restrain, or impose or result in the imposition of
any material adverse condition upon, the making or repayment of the Loan or the
consummation of the Transaction.


 


(k)           Representations and Warranties.  The representations and warranties herein
and in the other Loan Documents shall be true and correct in all material
respects on the Closing Date.


 


(l)            Survey; Appraisal.  Lender shall have received the Survey and the Appraisal with
respect to each Mortgaged Property, which shall be in form and substance
satisfactory to Lender in its sole and absolute discretion.


 


(m)          Property Condition Assessment.  Lender shall have received the Property
Condition Assessment with respect to each Mortgaged Property
prepared by the Engineer or another Person acceptable to the Lender, which Property
Condition Assessment shall be acceptable to Lender in its sole
and absolute discretion.


 


(n)           Environmental Matters.  Lender shall have received an Environmental Report prepared by an
Environmental Auditor with respect to the Mortgaged Property, which
Environmental Report shall be acceptable to Lender in its sole and absolute
discretion.


 


(o)           Financial Information.  Lender shall have received financial information relating to the
Guarantor, Borrower and the Mortgaged Property satisfactory to Lender in its
sole and absolute discretion.  Such
information shall include, without limitation, the following, to the extent
reasonably available:


 


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(i)            operating statements
for the current year (including actual to date information, an annual budget
and trailing twelve month data in hard copy and on diskette) and for not less
than the three preceding years;


 


(ii)           a copy of the standard
lease form, if any;


 


(iii)          current property rent
roll data on a tenant by tenant basis in hard copy including the name of each
tenant and the associated Homesite, security deposit, amount due at the
beginning of the month, charges in the current month (including Homesite rent,
water/sewer, gas/electric, trash, mobile home rent, notes and other charges),
payments made during the month, amount due at the end of the month, total
Homesites at the Mortgaged Property and total occupied Homesites at the
Mortgaged Property, with the occupancy level expressed as a percentage);


 


(iv)          the tax bills for 2003
and the historical tax records for 2002;


 


(v)           the most recent annual
financial statements and unaudited quarterly financial statements; and


 


(vi)          such other financial
information as is customarily required by institutional lenders for loans
similar in size and type as the Loan.


 


The annual financial statements relating to the Guarantor shall be
either (x) audited by a “Big Four” accounting firm or another firm of certified
public accountants reasonably acceptable to Lender or (y) prepared in
accordance with agreed upon procedures reasonably acceptable to Lender to be
performed by a “Big Four” accounting firm or another firm of certified public
accountants reasonably acceptable to Lender to create similar information.


 


(p)           Pro-Forma Financial Statement; Operating Budget.  Lender shall have received (i) the initial
pro-forma financial statement and Operating Budget for the Mortgaged Property
for the following twelve months (including on an annual and monthly basis a
break-down of projected Gross Revenues, Property Expenses, Capital Improvement
Costs, replacement reserve costs and average occupancy level (expressed as a
percentage)) and (ii) a financial statement that forecasts projected revenues and
operating expenses for not less than three years (including the assumptions
used in such forecast).


 


(q)           Site Inspection. 
Borrower shall have provided to Lender the opportunity to perform, or
cause to be performed on its behalf, an on-site due diligence review of the
Mortgaged Property, which inspection is satisfactory to Lender in its sole
discretion.


 


(r)            Mortgaged Property Documents.


 


(i)            Mortgages;
Assignments of Rents and Leases. 
Borrower shall have executed and delivered to Lender the Mortgages and
the Assignments of Rents and Leases with respect to the Mortgaged Property and
such Mortgages and Assignments of Rents and Leases shall have been filed of
record in the appropriate filing office in the jurisdiction in which the
Mortgaged Property is located or irrevocably delivered to a title agent for
such recordation.


 


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(ii)           Financing
Statements.  Borrower shall
have executed and delivered to Lender all financing statements required by
Lender pursuant hereto and such financing statements shall have been filed of
record in the appropriate filing offices in each of the appropriate
jurisdictions or irrevocably delivered to a title agent for such recordation.


 


(iii)          Management
Agreement and Manager’s Subordination.  Lender shall have received the executed Management Agreement for
the Mortgaged Property and the Manager shall have executed and delivered the
Manager’s Subordination to Lender.


 


(iv)          Contract
Assignment.  With respect to
the Mortgaged Property, Borrower shall have executed and delivered to Lender a
Contract Assignment with respect to the Mortgaged Property.


 


(s)           Opinions of Counsel.  Lender shall have received from counsel to Borrower reasonably
acceptable to Lender in each state in which any Mortgaged Property is located
its legal opinion in form and substance satisfactory to Lender, as to (i) the
enforceability of the Mortgages, Assignments of Rents and Leases and any other
Loan Documents governed by the law of such jurisdiction, (ii) perfection of
Liens and security interests and (iii) other matters referred to therein with
respect to each Mortgaged Property.  The
legal opinions will be addressed to Lender and its successors and assigns,
dated the Closing Date, and in form and substance reasonably satisfactory to
Lender and its counsel.


 


(t)            Insurance. 
Lender shall have received certificates of insurance demonstrating
insurance coverage in respect of each Mortgaged Property of types, in amounts,
with insurers and otherwise in compliance with the terms, provisions and
conditions set forth in this Agreement. 
Such certificates shall indicate that Lender is a named additional
insured and shall contain a loss payee endorsement in favor of Lender with
respect to the property policies required to be maintained under this
Agreement.


 


(u)           Title Insurance Policy.  Lender shall have received countersigned pro forma title policies
or marked binders constituting the unconditional commitment (in form and
substance reasonably satisfactory to Lender) to issue the Title Insurance
Policy covering the Mortgaged Property with an aggregate amount at least equal
to the Loan Amount.


 


(v)           Lien Search Reports.  Lender shall have received satisfactory reports of UCC
(collectively, the “UCC Searches”), tax
lien, judgment and litigation searches and title updates conducted by the
companies issuing the Title Insurance Policy with respect to the Collateral,
Guarantor, Borrower and the Member, such searches to be conducted in each of
the locations required by Lender.


 


(w)          Consents, Licenses, Approvals, etc.  Lender shall have received copies of all
consents, licenses and approvals, if any, required in connection with the
execution, delivery and performance by Borrower, Member and Guarantor and the
validity and enforceability, of the Loan Documents, and such consents, licenses
and approvals shall be in full force and effect.


 


(x)            Additional Real Estate Matters.  Lender shall have received such other real
estate related certificates and documentation relating to the Mortgaged
Property as Lender may


 


63

















 


have reasonably requested.  Such documentation shall include the following as requested by
Lender and to the extent reasonably available:


 


(i)            certificates of
occupancy issued by the appropriate Governmental Authorities of the
jurisdiction in which each Mortgaged Property is located reflecting, and
consistent with, the use of each Mortgaged Property as of the Closing Date;


 


(ii)           letters from the
appropriate local Governmental Authorities of the jurisdiction in which each
Mortgaged Property is located, certifying that each Mortgaged Property is in
compliance with all applicable zoning laws, rules and regulations, a zoning
endorsement to the applicable Title Insurance Policy with respect to each
Mortgaged Property and/or an acceptable zoning letter from Zoning Information
Services Inc.;


 


(iii)          copies of the Leases in
effect at each Mortgaged Property as Lender may request (in addition to the
copies delivered above); and


 


(iv)          a certified copy of the
purchase and sale agreement (with exhibits), if any, for the Mortgaged
Property.


 


(y)           Closing Statement.  Lender and Borrower shall have agreed upon a detailed closing
statement in a form reasonably acceptable to Lender, which includes a complete
description of Borrower’s sources and uses of funds on the Closing Date.


 


(z)            Loan-to-Value Ratio; Debt Service Coverage Test.  Lender shall have determined that (i) the
Loan Amount is not greater than 80% of the aggregate value of the Mortgaged
Property as set forth in the Appraisals delivered on the Closing Date and (ii)
the Debt Service Coverage Test is satisfied as of the Closing Date.


 


(aa)         Origination Fee. 
Lender shall have received its Origination Fee, which may be retained by
Lender from the proceeds of the Loan.


 


(bb)         Crossed Loan Documents.  The Crossed Loan Documents shall have been executed and delivered
by the Crossed Borrowers and other Persons party thereto.


 


Section 3.2.            Execution and
Delivery of Agreement.  The
execution and delivery of this Agreement by each party to this Agreement shall
be deemed to constitute the satisfaction or waiver of the conditions set forth
in Section 3.1; provided,
that any such deemed satisfaction or waiver shall be solely for the purposes of
Section 3.1 and shall not be deemed or
construed to constitute a waiver of any other provision of this Agreement or of
any provisions of any of the other Loan Documents, including, without
limitation, any undelivered items undertaking or agreement or other
post-closing agreement or undertaking entered into by Borrower and/or
Guarantor.


 


ARTICLE IV.

REPRESENTATIONS AND WARRANTIES


 


Section 4.1.            Representations
and Warranties as to Borrower. 
Borrower represents and warrants that, as of the Closing Date:


 


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(a)           Organization. 
Borrower (i) is a duly organized and validly existing limited liability
company in good standing under the laws of the State of Delaware, (ii) has the
requisite power and authority to own its properties (including, without
limitation, the Mortgaged Property) and to carry on its business as now being
conducted and is qualified to do business in the jurisdiction in which the
Mortgaged Property is located, and (iii) has the requisite power to execute and
deliver, and perform its obligations under, this Agreement, the Note and all of
the other Loan Documents to which it is a party.


 


(b)           Authorization; No Conflict; Consents and Approvals.  The execution and delivery by Borrower of
this Agreement, the Note and each of the other Loan Documents, Borrower’s
performance of its obligations hereunder and under the other Loan Documents and
the creation of the security interests and liens provided for in this Agreement
and the other Loan Documents to which it is a party (i) have been duly
authorized by all requisite action on the part of Borrower, (ii) will not
violate any provision of any Legal Requirements, any order of any court or
other Governmental Authority, the Organizational Agreement or any indenture or
agreement or other instrument to which Borrower is a party or by which Borrower
is bound, and (iii) will not be in conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under, or
result in the creation or imposition of any Lien of any nature whatsoever upon
the Mortgaged Property pursuant to, any such indenture or agreement or material
instrument other than the Loan Documents. 
Other than those obtained or filed on or prior to the Closing Date,
Borrower is not required to obtain any consent, approval or authorization from,
or to file any declaration or statement with, any Governmental Authority or
other agency in connection with or as a condition to the execution, delivery or
performance of this Agreement, the Note or the other Loan Documents executed
and delivered by Borrower.


 


(c)           Enforceability. 
This Agreement, the Note and each other Loan Document executed by
Borrower in connection with the Loan (including, without limitation, any
Collateral Security Instrument), is the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, subject to
bankruptcy, insolvency, and other limitations on creditors’ rights generally
and to equitable principles.  This
Agreement, the Note and such other Loan Documents are not subject to any right
of rescission, set-off, counterclaim or defense by Borrower (including the
defense of usury), and Borrower has not asserted any right of rescission,
set-off, counterclaim or defense with respect thereto.


 


(d)           Litigation. 
There are no actions, suits or proceedings at law or in equity by or
before any Governmental Authority or other agency now pending and served or, to
the best knowledge of Borrower, threatened against Borrower, Guarantor or any
Collateral, which actions, suits or proceedings, if determined against
Borrower, Guarantor or such Collateral, are reasonably likely to result in a
Material Adverse Effect.


 


(e)           Agreements. 
Borrower is not in default in the performance, observance or fulfillment
of any of the material obligations, covenants or conditions contained in any
agreement or instrument to which it is a party or by which Borrower or any
Collateral is bound which default is reasonably likely to have a Material
Adverse Effect.  Neither Borrower nor
Guarantor is a party to any agreement or instrument or subject to any
restriction which restricts such Person’s ability to conduct its business in
the ordinary course or that is reasonably likely to have a Material Adverse
Effect.


 


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(f)            No Bankruptcy Filing.  Neither Borrower nor Guarantor is contemplating either the filing
of a petition by it under any state or federal bankruptcy or insolvency laws or
the liquidation of all or a material portion of its assets or property.  To the best knowledge of Borrower, no Person
is contemplating the filing of any such petition against Borrower.


 


(g)           Solvency. 
Giving effect to the transactions contemplated hereby, the fair market
value of Borrower’s assets exceeds and will, immediately following the making
of the Loan, exceed Borrower’s total liabilities (including, without
limitation, subordinated, unliquidated, disputed and contingent
liabilities).  The fair market value of
Borrower’s assets is and will, immediately following the making of the Loan, be
greater than Borrower’s probable liabilities (including the maximum amount of
its contingent liabilities on its debts as such debts become absolute and
matured).  Borrower’s assets do not and,
immediately following the making of the Loan will not, constitute unreasonably
small capital to carry out its business as conducted or as proposed to be
conducted.  Borrower does not intend to,
and does not believe that it will, incur debts and liabilities (including,
without limitation, contingent liabilities and other commitments) beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts to be payable on or in respect of obligations of Borrower).


 


(h)           Other Debt. 
Borrower has not borrowed or received other debt financing whether
unsecured or secured by the Mortgaged Property or any part thereof which is
outstanding as of the Closing Date.  As
of the Closing Date, Borrower has no Other Borrowings other than trade debt
expressly permitted under Article VIII of this Agreement.


 


(i)            Full and Accurate Disclosure.  No statement of fact made by or on behalf of
Borrower in this Agreement or in any of the other Loan Documents contains any
untrue statement of material fact or omits to state any material fact necessary
to make statements contained herein or therein not misleading.  To the best knowledge of Borrower, no
financial statements or any other document, certificate or written statement
furnished to Lender by Borrower or Guarantor, or by any third party on behalf
of Borrower or Guarantor, for use in connection with the Loan contains any
untrue representation, warranty or statement of a material fact, and none omits
or will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. 
To the best knowledge of Borrower, there is no fact that has not been
disclosed to Lender that is reasonably likely to result in a Material Adverse
Effect.


 


(j)            Financial Information.  All financial statements and other data concerning Borrower,
Guarantor and the Mortgaged Property that has been delivered by or on behalf of
Borrower or Guarantor to Lender is true, complete and correct in all material
respects and, except as disclosed on Schedule 4 attached hereto, has been
prepared in accordance with GAAP.  Since
the delivery of such data, except as otherwise disclosed in writing to Lender,
there has been no change in the financial position of Borrower, Guarantor or
the Mortgaged Property, or in the results of operations of Borrower or
Guarantor, which change results or is reasonably likely to result in a Material
Adverse Effect.  Neither Borrower nor
Guarantor has incurred any obligation or liability, contingent or otherwise,
not reflected in such financial data, which is likely to have a Material
Adverse Effect upon its business operations or the Mortgaged Property.


 


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(k)           Investment Company Act; Public Utility Holding Company Act.  Borrower is not (i) an “investment company”
or a company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended, (ii) a “holding company” or a
“subsidiary company” of a “holding company” or an “affiliate” of either a
“holding company” or a “subsidiary company” within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or (iii) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money in accordance with this Agreement.


 


(l)            Compliance. 
Borrower is in compliance with all applicable Legal Requirements, except
for noncompliance that is not reasonably likely to have a Material Adverse
Effect.  Borrower is not in default or
violation of any order, writ, injunction, decree or demand of any Governmental
Authority except for defaults or violations which are not reasonably likely to
have a Material Adverse Effect.


 


(m)          Use of Proceeds; Margin Regulations.  Borrower will use the proceeds of the Loan
for the purposes described in Section 2.2.  No part of the proceeds of the Loan will be
used for the purpose of purchasing or acquiring any “margin stock” within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
or for any other purpose which would be inconsistent with such Regulation U or
any other Regulations of such Board of Governors, or for any purposes
prohibited by Legal Requirements.


 


(n)           Organizational Chart.  The organizational chart set forth as Schedule
2 accurately sets forth the direct and indirect ownership structure
of Borrower.


 


(o)           No Defaults. 
No Default or Event of Default exists under or with respect to any Loan
Document.


 


(p)           Plans and Welfare Plans.  The assets of Borrower are not treated as
“plan assets” under regulations currently promulgated under ERISA.  Neither Borrower nor any ERISA Affiliate
sponsors, maintains, contributes to or is required to contribute to any Plan or
Multiemployer Plan nor has the Borrower or any ERISA Affiliate sponsored,
maintained, contributed to or been required to contribute to any Plan or
Multiemployer Plan within the past six years. 
There are no pending issues or claims before the Internal Revenue
Service, the United States Department of Labor or any court of competent jurisdiction
related to any Plan or Welfare Plan.  No
event has occurred, and there exists no condition or set of circumstances, in
connection with any Plan or Welfare Plan under which Borrower or, to the best
knowledge of Borrower, any ERISA Affiliate, directly or indirectly (through an
indemnification agreement or otherwise), is reasonably likely to be subject to
any material risk of liability under Section 409 or 502(i) of ERISA or Section
4975 of the Code.  No Welfare Plan
provides or will provide benefits, including, without limitation, death or
medical benefits (whether or not insured) with respect to any current or former
employee of Borrower, or, to the best knowledge of Borrower, any ERISA
Affiliate beyond his or her retirement or other termination of service other
than (i) coverage mandated by applicable law, (ii) death or disability benefits
that have been fully provided for by fully paid up insurance or (iii) severance
benefits.


 


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(q)           Additional Borrower UCC Information.  Borrower’s organizational identification
numbers are 3723697 for Borrower A and 3743863 for Borrower B and the full
legal name of Borrower is as set forth on the signature pages hereof and
Borrower has not done in the last five (5) years, and does not do, business
under any other name (including any trade-name or fictitious business name).


 


(r)            Not Foreign Person.  Borrower is not a “foreign person” within the meaning of §
1445(f)(3) of the Code.


 


(s)           Labor Matters. 
Borrower is not a party to any collective bargaining agreements.


 


(t)            Pre-Closing Date Activities.  Borrower has not conducted any business or
other activity on or prior to the Closing Date, other than in connection with
the acquisition, management and ownership of the Mortgaged Property.


 


(u)           No Bankruptcies or Criminal Proceedings Involving Borrower
or Related Parties.  No
bankruptcy, insolvency, reorganization or comparable proceedings have ever been
instituted by or against Borrower, any Affiliate of Borrower, any Guarantor or
any individual or entity owning, with his, her or its family members, 20% or
more of the direct, or indirect beneficial ownership interests in Borrower
(each such Guarantor, individual, or entity being herein referred to as a
“Principal”), and no such proceeding is now pending or contemplated.  None of Borrower, any Principal, or to
Borrower’s knowledge, any other individual or entity directly or indirectly
owning or controlling, or the family members of which own or control, any
direct or indirect beneficial ownership interest in Borrower or in the Manager
or asset manager for the Mortgaged Property, have been charged, indicted or
convicted, or are currently under the threat of charge, indictment or
conviction, for any felony or crime punishable by imprisonment.


 


(v)           No Prohibited Persons.  Neither Borrower, Member, Guarantor nor any of their respective
officers, directors, shareholders, partners, members or Affiliates (including
the indirect holders of equity interests in Borrower) is or will be an entity
or person: (i) that is listed in the Annex to, or is otherwise subject to the
provisions of Executive Order 13224 issued on September 24, 2001 (“EO13224”); (ii) whose name appears on the United
States Treasury Department’s Office of Foreign Assets Control (“OFAC”) most current list of “Specifically
Designated National and Blocked Persons” (which list may be published from time
to time in various mediums including, but not limited to, the OFAC website,
http:www.treas.gov/ofac/t11sdn.pdf)(the “OFAC List”);
(iii) who commits, threatens to commit or supports “terrorism”, as that term is
defined in EO 13224; or (iv) who is otherwise affiliated with any entity or
person listed above (any and all parties or persons described in clauses (i)
through (iv) above are herein referred to as a “Prohibited
Person”).  To the best
knowledge of the Borrower, no tenant at the Property currently is identified on
the OFAC List or otherwise qualifies as a Prohibited Person and no tenant at
the Property is owned by or an Affiliate of a Prohibited Person.  Borrower and Manager have implemented and
will continue to follow procedures to ensure that no tenant at the Property is
a Prohibited Person or owned by or an Affiliate of a Prohibited Person.


 


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Section 4.2.            Representations
and Warranties as to the Mortgaged Property.  Borrower hereby represents and warrants to
Lender that, as to each Mortgaged Property and the Mortgages, as of the Closing
Date:


 


(a)           Title to the Mortgaged Property.  Borrower owns good, marketable and insurable
fee simple title to each Mortgaged Property (other than Personalty), free and
clear of all Liens, other than the Permitted Encumbrances.  Borrower owns the Personalty free and clear
of any and all Liens, other than Permitted Encumbrances.  There are no outstanding options to purchase
or rights of first refusal or restrictions on transferability affecting any
Mortgaged Property or any portion thereof or interest therein.


 


(b)           Utilities and Public Access.  Except as disclosed on Schedule 4, (i) each
Mortgaged Property has adequate rights of access to public ways and is served
by public water, electric, sewer, sanitary sewer and storm drain facilities;
(ii) all public utilities necessary to the continued use and enjoyment of each
Mortgaged Property as presently used and enjoyed are located in the public
right-of-way abutting the premises, and all such utilities are connected so as
to serve each Mortgaged Property without passing over other property except for
land or easement areas of or available to the utility company providing such
utility service; and (iii) all roads necessary for the full utilization of each
Mortgaged Property for its current purpose have been completed and dedicated to
public use and accepted by all Governmental Authorities or are the subject of
access easements for the benefit of each Mortgaged Property.


 


(c)           Condemnation. 
No Taking has been commenced or, to the best of Borrower’s knowledge, is
contemplated with respect to all or any portion of any Mortgaged Property or
for the relocation of roadways providing access to any Mortgaged Property.


 


(d)           Compliance. 
Each Mortgaged Property and the current use thereof is in compliance
with all applicable Legal Requirements (including, without limitation,
building, parking, subdivision, land use, health, fire, safety and zoning
ordinances and codes) and all applicable Insurance Requirements, except for
noncompliance which cannot reasonably be expected to result in a Material
Adverse Effect.  Each Mortgaged Property
is zoned for its current use, which zoning designation is unconditional, in
full force and effect, and is beyond all applicable appeal periods.   In the event that all or any part of the
Improvements located on any Mortgaged Property are destroyed or damaged, said
Improvements can be legally reconstructed to their condition prior to such
damage or destruction, and thereafter exist for the same use without violating
any zoning or other ordinances applicable thereto and without the necessity of
obtaining any variances or special permits, other than customary demolition,
building and other construction related permits.  No legal proceedings are pending or, to the knowledge of
Borrower, threatened with respect to the zoning of the Mortgaged Property.  Neither the zoning nor any other right to
construct, use or operate the Mortgaged Property is in any way dependent upon
or related to any real estate other than the Mortgaged Property.  No tract map, parcel map, condominium plan,
condominium declaration, or plat of subdivision will be recorded by Borrower
with respect to the Mortgaged Property without Lender’s prior written consent.


 


(e)           Environmental Compliance.  Except for matters set forth in the
Environmental Reports delivered to Lender in connection with the Loan (true,
correct and complete copies of which have been provided to Lender by Borrower):


 


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(i)            Borrower and each
Mortgaged Property is in full compliance with all applicable Environmental Laws
(which compliance includes, but is not limited to, the possession by Borrower
or the Manager of all environmental, health and safety permits, licenses and
other governmental authorizations required in connection with the ownership and
operation of the Mortgaged Property under all Environmental Laws), except for
noncompliance which cannot reasonably be expected to result in a Material
Adverse Effect.


 


(ii)           There is no material
Environmental Claim pending or, to the actual knowledge of Borrower, threatened,
and no penalties arising under Environmental Laws have been assessed against
Borrower, the Manager or any Mortgaged Property, or, to the actual knowledge of
Borrower, against any Person whose liability for any Environmental Claim
Borrower or the Manager has or may have retained or assumed either
contractually or by operation of law, and no material investigation or review
is pending or, to the actual knowledge of Borrower, threatened by any
Governmental Authority, citizens group, employee or other Person with respect
to any alleged failure by Borrower or the Manager or any Mortgaged Property to
have any environmental, health or safety permit, license or other authorization
required under, or to otherwise comply with, any Environmental Law or with respect
to any alleged liability of Borrower or the Manager for any Use or Release of
any Hazardous Substances.


 


(iii)          There are no present
and, to the best knowledge of the Borrower, there have been no past material
Releases of any Hazardous Substances that are reasonably likely to form the
basis of any Environmental Claim against Borrower, the Manager, any Mortgaged
Property or against any Person whose liability for any Environmental Claim
Borrower or the Manager has or may have retained or assumed either contractually
or by operation of law (other than Hazardous Substances being used in amounts
that are customary for properties such as the Mortgaged Property and for
purposes that are typical for properties such as the Mortgaged Property and in
all cases are utilized in compliance with Environmental Law in all material
respects).


 


(iv)          Without limiting the
generality of the foregoing, to the best knowledge of the Borrower, there is
not present at, on, in or under any Mortgaged Property, any Hazardous
Substances (including, without limitation, PCB-containing equipment, asbestos
or asbestos containing materials, underground storage tanks or surface
impoundments for Hazardous Substances, lead in drinking water or lead based
paint) (other than Hazardous Substances being used in amounts that are
customary for properties such as the Mortgaged Property and for purposes that
are typical for properties such as the Mortgaged Property and in all cases are
utilized in compliance with Environmental Law in all material respects) or any
fungus, mold, mildew or biological agent the presence of which is reasonably
likely to materially adversely affect the value or utility of such Mortgaged
Property.


 


(v)           No liens are presently
recorded with the appropriate land records under or pursuant to any
Environmental Law with respect to the Mortgaged Property and no Governmental
Authority has been taking or, to the actual knowledge of Borrower, is in


 


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the process of taking any
action that could subject the Mortgaged Property to Liens under any
Environmental Law.


 


(vi)          There have been no
environmental investigations, studies, audits, reviews or other analyses
conducted by or that are in the possession of Borrower in relation to any
Mortgaged Property which have not been made available to Lender.


 


(f)            Mortgage and Other Liens.  Each Mortgage creates a valid and
enforceable first priority Lien on the applicable Mortgaged Property described
therein, as security for the repayment of the Indebtedness, subject only to the
Permitted Encumbrances applicable to such Mortgaged Property.  This Agreement creates a valid and
enforceable first priority Lien on all Account Collateral.  Each Collateral Security Instrument
establishes and creates a valid, subsisting and enforceable Lien on and a
security interest in, or claim to, the rights and property described
therein.  All property covered by any
Collateral Security Instrument in which a security interest can be perfected by
the filing of a financing statement is subject to a UCC financing statement
filed and/or recorded, as appropriate (or irrevocably delivered to an agent for
such recordation or filing) in all places necessary to perfect a valid first
priority Lien with respect to the rights and property that are the subject of
such Collateral Security Instrument to the extent governed by the UCC.


 


(g)           Assessments. 
There are no pending or, to the best knowledge of Borrower, proposed
special or other assessments for public improvements or otherwise affecting any
Mortgaged Property, nor are there any contemplated improvements to any
Mortgaged Property that may result in such special or other assessments.


 


(h)           No Joint Assessment; Separate Lots.  Borrower has not suffered, permitted or
initiated the joint assessment of the Mortgaged Property (i) with any other
real property constituting a separate tax lot, and (ii) with any portion of the
Mortgaged Property which may be deemed to constitute personal property, or any
other procedure whereby the lien of any taxes which may be levied against such
personal property shall be assessed or levied or charged to the Mortgaged
Property as a single lien.  The
Mortgaged Property is comprised of one or more parcels, each of which constitutes
a separate tax lot and none of which constitutes a portion of any other tax
lot.


 


(i)            No Prior Assignment.  Lender is the collateral assignee of Borrower’s interest under
the Leases.  There are no prior
assignments of the Leases or any portion of the Rent due and payable or to become
due and payable which are presently outstanding.


 


(j)            Permits; Certificate of Occupancy.  Borrower has obtained all Permits necessary
to the use and operation of each Mortgaged Property, except for noncompliance
which cannot reasonably be expected to result in a Material Adverse
Effect.  The use being made of each
Mortgaged Property is in conformity with the certificate of occupancy and/or
such Permits for such Mortgaged Property and any other restrictions, covenants
or conditions affecting such Mortgaged Property, except for noncompliance which
cannot reasonably be expected to result in a Material Adverse Effect.


 


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(k)           Flood Zone. 
Except as shown on the Survey, no Mortgaged Property or any portion
thereof is located in a flood hazard area as defined by the Federal Insurance
Administration.


 


(l)            Physical Condition.  Except as set forth in the Property Condition Assessment, to the
best knowledge of Borrower, each Mortgaged Property is free of structural
defects and all Improvements, including the building systems contained therein
are in good working order subject to ordinary wear and tear.


 


(m)          Security Deposits.  Borrower and the Manager are in compliance in all material
respects with all Legal Requirements relating to all security deposits with
respect to each Mortgaged Property.


 


(n)           Intellectual Property.  All material Intellectual Property that Borrower owns or has
pending, or under which it is licensed, are in good standing and
uncontested.  There is no right under
any Intellectual Property necessary to the business of Borrower as presently
conducted or as Borrower contemplates conducting its business.  Borrower has not infringed, is not
infringing, and has not received notice of infringement with respect to asserted
Intellectual Property of others.  There
is no infringement by others of material Intellectual Property of Borrower.


 


(o)           No Encroachments.  Except as shown on the Survey, to the best knowledge of Borrower,
(i) all of the Improvements which were included in determining the appraised
value of each Mortgaged Property lie wholly within the boundaries and building
restriction lines of each Mortgaged Property, (ii) no improvements on adjoining
properties encroach upon any Mortgaged Property, (iii) no Improvements encroach
upon any easements or other encumbrances affecting the Mortgaged Property, and
(iv) all of the Improvements comply with all material requirements of any
applicable zoning and subdivision laws and ordinances.


 


(p)           Management Agreement.  The Management Agreement is in full force and effect.  There is no default, breach or violation
existing thereunder by Borrower or, to the best knowledge of Borrower, any
other party thereto and no event (other than payments due but not yet
delinquent) which, with the passage of time or with notice and the expiration
of any grace or cure period, would constitute a default, breach or violation by
Borrower or, to the best knowledge of Borrower, any other party thereunder or
entitle Borrower or, to the best knowledge of Borrower, any other party thereto
to terminate any such agreement.


 


(q)           Leases. 
No Mortgaged Property is subject to any Leases other than the Leases
described in the rent rolls delivered to Lender in connection with the making
of the Loan.  No person has any
possessory interest in any Mortgaged Property or right to occupy the same
except under and pursuant to the provisions of the Leases.  The current Leases are in full force and
effect and, except as set forth on the rent rolls delivered to Lender in
connection with the making of the Loan, or as disclosed on Schedule 4,
there are no monetary or other material defaults thereunder by either party and
no conditions which with the passage of time and/or notice would constitute
monetary or other material defaults thereunder.  Except as disclosed on Schedule 4,
no portion of the Mortgaged Property is leased to or occupied by any Affiliate
of Borrower.  Except as disclosed on Schedule 4, all Leases at each Mortgaged Property
consist


 


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solely of Leases of Homesites and related common
areas, and not of other portions of the Mortgaged Property.  Except as disclosed on Schedule 4, Borrower does not own any
manufactured homes or mobile homes, whether or not located at the Mortgaged
Property.  No material termination
payments or fees are due in the event Borrower cancels or terminates any
commercial Leases to which it is a party.


 


Section 4.3.            Survival of
Representations.  Borrower
agrees that (i) all of the representations and warranties of Borrower set forth
in Section 4.1 and 4.2
and in the other Loan Documents delivered on the Closing Date are made as of
the Closing Date, and (ii) all representations and warranties made by Borrower
shall survive the delivery of the Note and making of the Loan and continue for
so long as any amount remains owing to Lender under this Agreement, the Note or
any of the other Loan Documents; provided, however, that the representations set forth in Section 4.2(e) shall survive for five (5) years
following repayment of the Indebtedness. 
All representations, warranties, covenants and agreements made in this
Agreement or in the other Loan Documents shall be deemed to have been relied
upon by Lender notwithstanding any investigation heretofore or hereafter made
by Lender or on Lender’s behalf.


 


ARTICLE V.

AFFIRMATIVE COVENANTS


 


Section 5.1.            Affirmative
Covenants.  Borrower
covenants and agrees that, from the date hereof and until payment in full of
the Indebtedness:


 


(a)           Existence; Compliance with Legal Requirements: Insurance.  Borrower shall do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
existence as a limited liability company, and any rights, licenses, Permits and
franchises necessary for the conduct of its business and will comply with all
Legal Requirements and Insurance Requirements applicable to it and to each
Mortgaged Property in all material respects. 
Borrower shall at all times maintain, preserve and protect all
franchises and trade names and preserve all the remainder of its property
necessary for the continued conduct of its business and keep the Mortgaged
Property in good repair, working order and condition, except for reasonable
wear and use (and except for casualty losses as to which other provisions
hereof shall govern), and from time to time make, or cause to be made, all
reasonably necessary repairs, renewals, replacements, betterments and
improvements thereto.


 


(b)           Basic Carrying Costs and Other Claims; Contest.


 


(i)            Subject to Borrower’s
contest rights set forth in Section 5.1(b)(ii)
below, Borrower will pay when due (A) all Basic Carrying Costs with respect to
Borrower and the Mortgaged Property; (B) all claims (including claims for
labor, services, materials and supplies) for sums that have become due and
payable and that by law have or may become a Lien upon any of the Mortgaged
Property or its other properties or assets (hereinafter referred to as the “Lien Claims”); and (C) all federal, state and
local income taxes, sales taxes, excise taxes and all other taxes and
assessments of Borrower on its business, income or assets; in each instance
before any penalty or fine is incurred with respect thereto.  Borrower’s obligation to pay Basic Carrying
Costs pursuant to this Agreement shall include, to the extent permitted by
applicable law, Impositions resulting


 


73

















 


from future changes in law which impose upon Lender an
obligation to pay any property taxes on the Mortgaged Property or other
Impositions.


 


(ii)           Borrower shall not be
required to pay, discharge or remove any Imposition or Lien Claim so long as
Borrower contests in good faith such Imposition or Lien Claim or the validity,
applicability or amount thereof by an appropriate legal proceeding which
operates to prevent the collection of such amounts and the sale of the
applicable Mortgaged Property or any portion thereof, so long as:


 


(A)          the Indebtedness shall
not have been accelerated, if an Event of Default shall have occurred and be
continuing;


 


(B)           prior to the date on
which such Imposition or Lien Claim would otherwise have become delinquent,
Borrower shall have given Lender prior written notice of its intent to contest
said Imposition or Lien Claim deposited with Lender (or with a court of
competent jurisdiction or other appropriate body approved by Lender) such
additional amounts as are necessary to keep on deposit at all times, an amount
equal to at least one hundred twenty five percent (125%) (or such higher amount
as may be required by applicable law) of the total of (x) the balance of such
Imposition or Lien Claim then remaining unpaid, and (y) all interest,
penalties, costs and charges accrued or accumulated thereon, together with such
other security as may be required in the proceeding, or as may be required by
Lender, to insure the payment of any such Imposition or Lien Claim and all
interest and penalties thereon; provided, that notwithstanding the
foregoing, with respect to Impositions or Lien Claims in an amount not in
excess of $100,000, Borrower shall not be required to deposit such amounts with
the Lender, so long as Borrower demonstrates to the reasonable satisfaction of
the Lender that Borrower has otherwise reserved such funds or such funds are
otherwise available to the Borrower;


 


(C)           no risk of sale,
forfeiture or loss of any interest in the Mortgaged Property or any part
thereof arises, in Lender’s judgment, during the pendency of such contest;


 


(D)          such contest does not,
in Lender’s determination, have a Material Adverse Effect;


 


(E)           such contest is based
on bona fide, material, and
reasonable claims or defenses;


 


(F)           such proceeding shall
be permitted under and be conducted in accordance with the provisions of any
other instrument to which Borrower is subject and shall not constitute a
default thereunder and such proceeding shall be conducted in accordance with
all applicable statutes, laws and ordinances; and


 


(G)           Borrower shall have
obtained such endorsements to the Title Insurance Policy with respect to such
Imposition or Lien Claim as Lender may require (or escrowed with a title
insurance company funds sufficient to obtain


 


74

















 


such endorsements pursuant to escrow arrangements
reasonably satisfactory to Lender).


 


Any such contest shall be
prosecuted with due diligence, and Borrower shall promptly pay the amount of
such Imposition or Lien Claim as finally determined, together with all interest
and penalties payable in connection therewith. 
Lender shall have full power and authority, but no obligation, to apply
any amount deposited with Lender under this subsection to the payment of any
unpaid Imposition or Lien Claim to prevent the sale or forfeiture of the
Mortgaged Property for non-payment thereof, if Lender reasonably believes that
such sale or forfeiture is threatened. 
Any surplus retained by Lender after payment of the Imposition or Lien
Claim for which a deposit was made shall be promptly repaid to Borrower unless
an Event of Default shall have occurred, in which case said surplus may be
retained by Lender to be applied as Lender, in its sole and absolute
discretion, may elect.


 


(c)           Litigation. 
Borrower shall give prompt written notice to Lender of any material
litigation or governmental proceedings pending or threatened (in writing)
against Borrower, or the Mortgaged Property, other than personal injury
litigation which is covered by insurance, eviction matters with respect to
tenants or occupants (in which no counterclaims for material damages or
liabilities are made against Borrower), and matters related to enforcement of
building or zoning codes (as long as the Mortgaged Property is in material
compliance with such building and zoning codes).


 


(d)           Environmental Remediation.


 


(i)            If any investigation,
site monitoring, cleanup, removal, restoration or other remedial work of any
kind or nature is required pursuant to an order or directive of any
Governmental Authority or under any applicable Environmental Law, because of or
in connection with the current or future presence, suspected presence, Release
or suspected Release of a Hazardous Substance on, under or from any Mortgaged
Property or any portion thereof (collectively, the “Remedial
Work”), Borrower shall promptly commence and diligently prosecute to
completion all such Remedial Work, and shall conduct such Remedial Work in
accordance with the National Contingency Plan promulgated under the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§ 9601 et seq. (“CERCLA”), if applicable,
and in accordance with other applicable Environmental Laws.  In all events, such Remedial Work shall be
commenced within such period of time as required under any applicable
Environmental Law.  If any fungus, mold,
mildew or other biological agent is present at any Mortgaged Property in a
manner or at a level that is reasonably likely to materially adversely affect
the value or utility of such Mortgaged Property or that poses a significant
health risk, the Borrower shall promptly commence and diligently prosecute to
completion the remediation of such condition to the reasonable satisfaction of
the Lender or its servicer.


 


(ii)           If requested by Lender,
all Remedial Work under clause (i) above
shall be performed by contractors, and, if the work is reasonably anticipated
to cost in excess of $75,000, under the supervision of a consulting Engineer,
each approved in advance by Lender which approval shall not be unreasonably
withheld or delayed.  Borrower shall


 


75

















 


pay all costs and expenses reasonably incurred in
connection with such Remedial Work.  If
Borrower does not timely commence and diligently prosecute to completion the
Remedial Work, Lender may (but shall not be obligated to), upon 10 days prior
written notice to Borrower of its intention to do so, cause such Remedial Work
to be performed.  Borrower shall pay or
reimburse Lender on demand for all expenses (including reasonable attorneys’
fees and disbursements, but excluding internal overhead, administrative and
similar costs of Lender) reasonably relating to or incurred by Lender in
connection with monitoring, reviewing or performing any Remedial Work in
accordance herewith.


 


(iii)          Borrower shall not
commence any Remedial Work under clause (i)
above, nor enter into any settlement agreement, consent decree or other
compromise relating to any Hazardous Substances or Environmental Laws without
providing notice to Lender as provided in Section
5.1(f).  Notwithstanding the
foregoing, if the presence or threatened presence of Hazardous Substances on,
under, about or emanating from the Mortgaged Property poses an immediate threat
to the health, safety or welfare of any Person or the environment, or is of
such a nature that an immediate response is necessary or required under
applicable Environmental Law, Borrower may complete all necessary Remedial
Work.  In such events, Borrower shall
notify Lender as soon as practicable and, in any event, within three (3) Business
Days, of any action taken.


 


(iv)          In the event the
Environmental Report recommends the development of an operation and maintenance
program for any recognized environmental condition at a Mortgaged Property
(including, without limitation, underground storage tanks asbestos and asbestos
containing materials, lead-based paints and lead in water supplies) (“O & M Program”), Borrower shall develop an O
& M Program, as approved by Lender, in Lender’s sole discretion, and shall,
during the term of the Loan, comply in all respects with the terms and
conditions of the O & M Program.


 


(e)           Environmental Matters: Inspection.


 


(i)            Borrower shall not
knowingly permit any Hazardous Substances to be present on or under or to
emanate from the Mortgaged Property, or migrate from adjoining property onto or
into the Mortgaged Property, except under conditions permitted by applicable
Environmental Laws and, in the event that such Hazardous Substances are present
on, under or emanate from the Mortgaged Property, or migrate onto or into the
Mortgaged Property, Borrower shall cause the removal or remediation of such
Hazardous Substances, in accordance with this Agreement and as required by
Environmental Laws (including, where applicable, the National Contingency Plan
promulgated pursuant to the CERCLA), either on its own behalf or by causing a
tenant or other party legally responsible therefor to perform such removal and
remediation.  Borrower shall use
commercially reasonable efforts to prevent, and to seek the remediation of, any
migration of Hazardous Substances onto or into the Mortgaged Property from any
adjoining property.


 


(ii)           Upon reasonable prior
written notice, Lender shall have the right, except as otherwise provided under
Leases, at all reasonable times during normal business hours


 


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to enter upon and inspect environmental conditions
with respect to all or any portion of any Mortgaged Property, provided that such inspections shall not
unreasonably interfere with the operation or the tenants, residents or occupants
of any Mortgaged Property.  If Lender
has reasonable grounds to suspect that Remedial Work may be required, Lender
shall notify Borrower and, thereafter, may select a consulting Engineer to
conduct and prepare reports of such inspections (with notice to Borrower prior
to the commencement of such inspection). 
Borrower shall be given a reasonable opportunity to review any reports,
data and other documents or materials reviewed or prepared by the Engineer, and
to submit comments and suggested revisions or rebuttals to same.  The inspection rights granted to Lender in
this Section 5.1(e) shall be in addition
to, and not in limitation of, any other inspection rights granted to Lender in
this Agreement, and shall expressly include the right (if Lender reasonably
suspects that Remedial Work may be required) to conduct soil borings, establish
ground water monitoring wells and conduct other customary environmental tests,
assessments and audits.


 


(iii)          Borrower agrees to bear
and shall pay or reimburse Lender on demand for all sums advanced and
reasonable expenses incurred (including reasonable attorneys’ fees and
disbursements, but excluding internal overhead, administrative and similar
costs of Lender) reasonably relating to, or incurred by Lender in connection
with, the inspections and reports described in this Section
5.1(e) (to the extent such inspections and reports relate to any
Mortgaged Property) in the following situations:


 


(x)            If
Lender has reasonable grounds to believe, at the time any such inspection is
ordered, that there exists an occurrence or condition that could lead to a
material Environmental Claim;


 


(y)           If
any such inspection reveals an occurrence or condition that is reasonably
likely to lead to a material Environmental Claim with respect to such Mortgaged
Property; or


 


(z)            If
an Event of Default with respect to such Mortgaged Property exists at the time
any such inspection is ordered, and such Event of Default relates to any
representation, covenant or other obligation pertaining to Hazardous
Substances, Environmental Laws or any other environmental matter.


 


(f)            Environmental Notices.  Borrower shall promptly provide notice to Lender of:


 


(i)            a material
Environmental Claim asserted by any Governmental Authority with respect to any
Hazardous Substance on, in, under or emanating from any Mortgaged Property;


 


(ii)           any proceeding,
investigation or inquiry commenced or threatened in writing by any Governmental
Authority, against Borrower, any Affiliate of Borrower or with respect to any
Mortgaged Property concerning the presence, suspected presence, Release or
threatened Release of Hazardous Substances from or onto, in or under any


 


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property not owned by Borrower (including, without
limitation, proceedings under the CERCLA;


 


(iii)          a material Environmental
Claims asserted or threatened against Borrower, against any other party
occupying any Mortgaged Property or any portion thereof which become known to
Borrower or against any Mortgaged Property;


 


(iv)          the discovery by
Borrower of a material occurrence or condition giving rise to an obligation of
the Borrower to the Lender hereunder on any Mortgaged Property or on any real
property adjoining or in the vicinity of any Mortgaged Property;


 


(v)           the commencement or
completion of any Remedial Work; and


 


(vi)          any of the foregoing
clauses (i) – (v) as to which a tenant notifies Borrower under a Lease with
respect to such tenant.


 


(g)           Copies of Notices.  Borrower shall transmit to Lender copies of any citations,
orders, notices or other written communications received from any Person and
any notices, reports or other written communications submitted to any
Governmental Authority with respect to the matters described in Section 5.1(f).


 


(h)           Environmental Claims.  Lender may join and participate in, as a party if Lender so
determines, any legal or administrative proceeding or action concerning the
Mortgaged Property or any portion thereof under any Environmental Law, if, in
Lender’s reasonable judgment, the interests of Lender shall not be adequately
protected by Borrower; provided, however, that Lender shall not participate in
day-to-day decision making with respect to environmental compliance.  Borrower shall pay or reimburse Lender on
demand for all reasonable sums advanced and reasonable expenses incurred
(including reasonable attorneys’ fees and disbursements, but excluding internal
overhead, administrative and similar costs of Lender) by Lender in connection
with any such action or proceeding.


 


(i)            Environmental Indemnification.  Borrower shall indemnify, reimburse, defend,
and hold harmless Lender, and each of its respective parents, subsidiaries,
Affiliates, shareholders, directors, officers, employees, representatives,
agents, successors, assigns and attorneys (collectively, the “Indemnified Parties”) for, from, and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses (including, without limitation, interest,
penalties, reasonable attorneys’ fees, disbursements and expenses, and
reasonable consultants’ fees, disbursements and expenses (but excluding
internal overhead, administrative, lost opportunity and similar costs of
Lender)), asserted against, resulting to, imposed on, or incurred by any
Indemnified Party, directly or indirectly, in connection with any of the
following (except to the extent same are directly and solely caused by the
gross negligence or willful misconduct of any Indemnified Party):


 


(i)            events, circumstances,
or conditions which form the reasonable basis for an Environmental Claim;


 


(ii)           any pollution or threat
to human health or the environment that is related in any way to Borrower’s or
any previous owner’s or operator’s management, use,


 


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control, ownership or operation of any Mortgaged
Property (including, without limitation, all on-site and off-site activities
involving Hazardous Substances), and whether occurring, existing or arising
prior to or from and after the date hereof, and whether or not the pollution or
threat to human health or the environment is described in the Environmental
Reports;


 


(iii)          any Environmental Claim
against any Person whose liability for such Environmental Claim Borrower has or
may have assumed or retained either contractually or by operation of law; or


 


(iv)          the breach of any
representation, warranty or covenant set forth in Section 4.2(e) and Sections
5.1(d) through 5.1(i), inclusive.


 


The provisions of and undertakings and indemnification set forth in
this Section 5.1(i) shall survive the
satisfaction and payment of the Indebtedness and termination of this Agreement.


 


(j)            General Indemnity.


 


(i)            Borrower shall, at its
sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties for, from and against any and all claims, suits,
liabilities (including, without limitation, strict liabilities), administrative
and judicial actions and proceedings, obligations, debts, damages, losses,
costs, expenses, fines, penalties, charges, fees, expenses, judgments, awards,
amounts paid in settlement, and litigation costs, of whatever kind or nature
and whether or not incurred in connection with any judicial or administrative
proceedings (including, but not limited to, reasonable attorneys’ fees and
other reasonable costs of defense) (the “Losses”)
imposed upon or incurred by or asserted against any Indemnified Parties (except
as to any Indemnified Party to the extent same are directly and solely caused
by the gross negligence or willful misconduct of such Indemnified Party) and
directly or indirectly arising out of or in any way relating to any one or more
of the following:


 


(A)          ownership of the Note or
any of the other Loan Documents or otherwise related to the Mortgaged Property
or any interest therein or receipt of any Rents or Accounts;


 


(B)           any untrue statement of
any material fact contained in any information concerning Borrower, the
Mortgaged Property or the Loan or the omission to state therein a material fact
required to be stated in such information or necessary in order to make the
statements in such information or in light of the circumstances under which
they were made not misleading;


 


(C)           any and all lawful
action that may be taken and is taken by the Lender in connection with the
enforcement of the provisions of this Agreement, the Note or any of the other
Loan Documents, whether or not suit is filed in connection with same, or in
connection with Borrower or any Affiliate of Borrower becoming a party to a
voluntary or involuntary federal or state bankruptcy, insolvency or similar
proceeding;


 


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(D)          any accident, injury to
or death of persons or loss of or damage to property occurring in, on or about
any Mortgaged Property or any part thereof or on the adjoining sidewalks,
curbs, adjacent property or adjacent parking areas, streets or ways;


 


(E)           any use, nonuse or
condition in, on or about the Mortgaged Property or any part thereof or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking areas,
streets or ways;


 


(F)           any failure on the part
of Borrower to perform or be in compliance with any of the terms of this
Agreement or any of the other Loan Documents;


 


(G)           performance of any
labor or services or the furnishing of any materials or other property in
respect of the Mortgaged Property or any part thereof pursuant to provisions of
this Agreement;


 


(H)          the failure of Borrower
to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with this Agreement;


 


(I)            any failure of the
Mortgaged Property to be in compliance with any Legal Requirement;


 


(J)            the enforcement by any
Indemnified Party of the provisions of this Section
5.1(j); and


 


(K)          any and all claims and
demands whatsoever which may be asserted against Lender by reason of any
alleged obligations or undertakings on its part to perform or discharge any of
the terms, covenants, or agreements contained in any Lease.


 


Any amounts payable to an Indemnified Party by reason
of the application of this Section 5.1(j)(i)
shall become due and payable ten (10) days after written demand and shall bear
interest at the Default Rate from the tenth (10th) day after demand until paid.


 


(ii)           Borrower shall, at its
sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses imposed upon or
incurred by or asserted against any of the Indemnified Parties and directly or
indirectly arising out of or in any way relating to any tax on the making
and/or recording of this Agreement, the Note or any of the other Loan
Documents.


 


(iii)          Borrower shall, at its
sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses (including, without
limitation, reasonable attorneys’ fees and costs) that the Indemnified Parties
may incur, directly or indirectly, as a result of a default under Borrower’s
covenants with respect to ERISA and employee benefits plans contained herein,
including, without limitation, any costs or expenses incurred in the
investigation, defense,


 


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and settlement of Losses incurred in correcting any
prohibited transaction or in the sale of a prohibited loan, and in obtaining
any individual prohibited transaction exemption under ERISA that may be
required, in the Lender’s reasonable discretion).


 


(iv)          Promptly after receipt
by an Indemnified Party under this Section 5.1(j)
of notice of the making of any claim or the commencement of any action, such
Indemnified Party shall, if a claim in respect thereof is to be made by such Indemnified
Party against Borrower under this Section 5.1(j),
notify Borrower in writing, but the omission so to notify Borrower will not
relieve Borrower from any liability which it may have to any Indemnified Party
under this Section 5.1(j) or otherwise.  In case any such claim is made or action is
brought against any Indemnified Party and such Indemnified Party seeks or
intends to seek indemnity from Borrower, Borrower will be entitled to
participate in, and, to the extent that it may wish, to assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Party; and,
upon receipt of notice from Borrower to such Indemnified Party of its election
so to assume the defense of such claim or action and only upon approval by the
Indemnified Party of such counsel (such approval not to be unreasonably
withheld or delayed), Borrower will not be liable to such Indemnified Party
under this Section 5.1(j) for any legal or
other expenses subsequently incurred by such Indemnified Party in connection with
the defense thereof.  Notwithstanding
the preceding sentence, each Indemnified Party will be entitled to employ
counsel separate from such counsel for Borrower and from any other party in
such action if such Indemnified Party reasonably determines that a conflict of
interest exists which makes representation by counsel chosen by Borrower not
advisable.  In such event, Borrower
shall pay the reasonable fees and disbursements of such separate counsel.  Borrower shall not, without the prior
written consent of an Indemnified Party, which consent shall not be
unreasonably withheld or delayed, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit
or proceeding in respect of which indemnification may be sought hereunder
(whether or not such Indemnified Party is an actual or potential party to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising out
of such claim, action, suit or proceeding. 
Each Indemnified Party shall not enter into a settlement of or consent
to the entry of any judgment with respect to any action, claim, suit or
proceeding as to which an Indemnified Party would be entitled to indemnification
hereunder without the prior written consent of Borrower, which consent shall
not be unreasonably withheld or delayed.


 


The provisions of and undertakings and indemnification
set forth in this Section 5.1(j) shall
survive the satisfaction and payment of the Indebtedness and termination of
this Agreement.


 


(k)           Access to Mortgaged Property.  Borrower shall permit agents,
representatives and employees of Lender to inspect each Mortgaged Property or
any part thereof at such reasonable times as may be requested by Lender upon
reasonable advance written notice (except during an Event of Default), subject,
however, to the rights of Borrower and of the tenants of the Mortgaged
Property.


 


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(l)            Notice of Default.  Borrower shall promptly advise Lender in writing of any change in
Borrower’s condition, financial or otherwise, that is reasonably likely to have
a Material Adverse Effect, or of the occurrence of any Default or Event of
Default.


 


(m)          Cooperate in Legal Proceedings.  Except with respect to any claim by
Borrower, the Member or the Guarantor against Lender, Borrower shall reasonably
cooperate with Lender with respect to any proceedings before any Governmental
Authority that are reasonably likely to in any way materially affect the rights
of Lender hereunder or any rights obtained by Lender under any of the Loan
Documents and, in connection therewith, shall not prohibit Lender, at its
election, from participating in any such proceedings.


 


(n)           Perform Loan Documents.  Borrower shall observe, perform and satisfy all the terms,
provisions, covenants and conditions required to be observed, performed or
satisfied by it, and shall pay when due all costs, fees and expenses required to
be paid by it, under the Loan Documents.


 


(o)           Insurance Benefits.  Borrower shall reasonably cooperate with Lender in obtaining for
Lender the benefits of any Insurance Proceeds lawfully or equitably payable to
Borrower or Lender in connection with any Mortgaged Property.  Lender shall be reimbursed for any expenses
reasonably incurred in connection therewith (including reasonable attorneys’
fees and disbursements, but excluding internal overhead, administrative and
similar costs of Lender) out of such Insurance Proceeds, all as more
specifically provided in this Agreement.


 


(p)           Further Assurances.  Borrower shall, at Borrower’s sole cost and expense:


 


(i)            upon Lender’s
reasonable request therefor given from time to time, pay for (a) reports of
UCC, tax lien, judgment and litigation searches with respect to Borrower, and
(b) searches of title to the Mortgaged Property, each such search to be
conducted by search firms designated by Lender in each of the locations
designated by Lender;


 


(ii)           furnish to Lender all
instruments, documents, certificates, title and other insurance reports and
agreements, and each and every other document, certificate, agreement and
instrument required to be furnished pursuant to the terms of the Loan
Documents;


 


(iii)          execute and deliver to
Lender such documents, instruments, certificates, assignments and other
writings, and do such other acts necessary, to evidence, preserve and/or
protect the Collateral at any time securing or intended to secure the Note, as
Lender may reasonably require (including, without limitation, tenant estoppel
certificates, an amended or replacement Mortgages, UCC financing statements or
Collateral Security Instruments); and


 


(iv)          do and execute all and
such further lawful and reasonable acts, conveyances and assurances for the better
and more effective carrying out of the intents and purposes of this Agreement
and the other Loan Documents, as Lender shall reasonably require from time to
time.


 


(q)           Management of Mortgaged Property.


 


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(i)            Each Mortgaged
Property shall be managed at all times by the current Manager or another
manager reasonably satisfactory to Lender, pursuant to a Management
Agreement.  Any such Manager may be an
Affiliate of Borrower, provided that: 
(a) the terms and conditions of such Manager’s engagement are at arm’s
length, reasonable, competitive and customary in the applicable marketplace;
and (b) Lender has approved such Manager and such terms, which approval shall
not be unreasonably withheld or delayed. 
The Management Agreement, dated as of the date hereof, between the
Borrower and the Manager is deemed approved by Lender in all respects.  Borrower shall cause the Manager of the
Mortgaged Property to agree that such Manager’s Management Agreement is subject
and subordinate in all respects to the Indebtedness and to the Lien of the
Mortgages.  A Management Agreement may
be terminated or assigned by the Manager (1) by Borrower at any time in
accordance with the provisions of such Management Agreement so long as a
successor or assignee Manager as specified below shall have been appointed and
approved and such successor Manager has (i) entered into (or assumed) a
Management Agreement in form and substance approved by Lender, which approval
shall not be unreasonably denied, conditioned or delayed, and (ii) has executed
and delivered a Manager’s Subordination to Lender, and (2) by Lender upon
thirty (30) days’ prior written notice to Borrower and the Manager (a) upon the
occurrence and continuation of an Event of Default or (b) if the Manager
commits any act which would permit termination under the Management Agreement
(subject to any applicable notice, grace and cure periods provided in the
Management Agreement) or (c) if a change of majority control occurs with respect
to the Manager.  Notwithstanding the
foregoing, any successor manager selected hereunder by Lender or Borrower to
manage the Mortgaged Property shall be a reputable management company having
substantial experience in the management of real property of a similar type,
size and quality in the state in which the Mortgaged Property is located.  Borrower may from time to time appoint a
successor manager to manage the Mortgaged Property with Lender’s prior written
consent, such consent not to be unreasonably withheld.  Borrower acknowledges and agrees that any
consent or approval requested of Lender under this Section may be conditioned
by Lender, at Lender’s discretion, upon Borrower first obtaining a Rating
Confirmation with respect to such change in management, and Lender shall not be
deemed to be acting unreasonably in requiring such a Rating Confirmation.  Borrower further covenants and agrees that
any manager of Mortgaged Property shall at all times while any Indebtedness is
outstanding maintain worker’s compensation insurance as required by
Governmental Authorities.


 


(ii)           Borrower further
covenants and agrees that each Mortgaged Property shall be operated pursuant to
the Management Agreement and that Borrower shall:  (w) promptly perform and/or observe all of the material covenants
and agreements required to be performed and observed by it under the Management
Agreement and do all things reasonably necessary to preserve and to keep
unimpaired its material rights thereunder; (x) promptly notify Lender of any
material default under the Management Agreement of which it is aware; (y)
promptly deliver to Lender a copy of each financial statement, business plan,
capital expenditures plan, notice and report received by it under the
Management Agreement, including, but not limited to, financial statements; and
(z) promptly enforce the performance and observance of the covenants and
agreements


 


83

















 


required to be performed and/or observed by the
Manager under the Management Agreement.


 


(r)            Financial Reporting.


 


(i)            Borrower shall keep
and maintain or shall cause to be kept and maintained on a Fiscal Year basis in
accordance with GAAP consistently applied, books, records and accounts
reflecting in reasonable detail all of the financial affairs of Borrower and
all items of income and expense in connection with the operation of the
Mortgaged Property and ownership of the Mortgaged Property and in connection
with any services, equipment or furnishings provided in connection with the
operation of the Mortgaged Property, whether such income or expense may be
realized by Borrower or by any other Person whatsoever.  Lender shall have the right from time to
time at all times during normal business hours upon reasonable prior written
notice to Borrower to examine such books, records and accounts at the office of
Borrower or other Person maintaining such books, records and accounts and to
make such copies or extracts thereof as Lender shall desire.  During the continuation of an Event of
Default (including, without limitation, an Event of Default resulting from the
failure of Borrower to deliver any of the financial information required to be
delivered pursuant to this Section 5.1(r)),
Borrower shall pay any reasonable costs and expenses incurred by Lender to
examine Borrower’s accounting records, as Lender shall reasonably determine to
be necessary or appropriate in the protection of Lender’s interest.


 


(ii)           Borrower shall furnish
to Lender annually, within ninety (90) days following the end of each Fiscal
Year, a complete copy of Borrower’s and Guarantor’s financial statements, each
audited by a “Big Four” accounting firm or such other Independent certified
public accountant acceptable to Lender in accordance with GAAP consistently applied
covering Borrower’s and Guarantor’s respective financial position and results
of operations, for such Fiscal Year and containing a statement of revenues and
expenses, a statement of assets and liabilities and a statement of Borrower’s
or Guarantor’s (as applicable) equity, all of which shall be in form and
substance reasonably acceptable to Lender. 
Any audit requirements of the Borrower pursuant to this Agreement may be
satisfied by delivery of the audited consolidated financial statements of the Guarantor,
provided that such financial statements of the Guarantor contain (i) a separate
income and expense statement for the Borrower and (ii) a separate balance
sheet, including a statement of Borrower’s equity.  Lender shall have the right from time to time to review and
consult with respect to the auditing procedures used in the preparation of such
annual financial statements.  Together
with Borrower’s and Guarantors’ annual financial statements, Borrower shall furnish,
and cause Guarantor to furnish, to Lender an Officer’s Certificate certifying
as of the date thereof (x) that the annual financial statements present fairly
in all material respects the results of operations and financial condition of
Borrower or Guarantor, as applicable, all in accordance with GAAP consistently
applied, and (y) whether there exists an Event of Default or Default, and if
such Event of Default or Default exists, the nature thereof, the period of time
it has existed and the action then being taken to remedy same.


 


84

















 


(iii)          Borrower shall furnish
to Lender, within forty-five (45) days following the end of each Fiscal Year
quarter true, complete and correct quarterly unaudited financial statements
(including statements of cash flow) prepared in accordance with GAAP with
respect to Borrower and Guarantor for the portion of the Fiscal Year then
ended.


 


(iv)          No later than thirty
(30) days following the end of each of the months of December, March, June, and
September, beginning with the month ending at March 31, 2004, Borrower shall
prepare and deliver to Lender and its servicer a statement (each a “Quarterly Statement”) in substantially the form
of Schedule 8 hereto, setting forth with respect to the Mortgaged
Property,


 


(A)          a rent roll dated as of
the last day of such quarter identifying the name of each tenant and the
associated Homesite, security deposit, amount due at the beginning of the
month, charges in the current month (including Homesite rent, water/sewer,
gas/electric, trash, mobile home rent, notes amount and other charges),
payments made during the month, amount due at the end of the month, total
Homesites at the Mortgaged Property and total occupied Homesites at the
Mortgaged Property, with the occupancy level expressed as a percentage;


 


(B)           quarterly and
year-to-date operating statements, each of which shall include an itemization
of budgeted and actual (not pro forma) capital expenditures during the
applicable period, and which shall be prepared for each individual Mortgaged
Property and, on a consolidated basis, for all the Mortgaged Property; and


 


(C)           a quarterly and
year-to-date comparison of the budgeted income and expenses with the actual
income and expenses for such quarter and year to date, together with if requested
by Lender, a detailed explanation of any variances between budgeted and actual
amounts that are in excess of five percent (5%) for each line item therein.


 


(v)           Within thirty (30) days
after the end of each calendar month (and as to rent rolls requested by Lender
on an interim basis, within thirty (30) days after Lender’s request therefor),
Borrower shall provide to Lender and its servicer a statement (each a “Monthly
Statement”) in substantially the form of Schedule 9 hereto, setting
forth with respect to the Mortgaged Property


 


(A)          a certified rent roll,
for each individual Mortgaged Property containing the information referred to
in Section 5.1(r)(iv)(A),


 


(B)           a certification of all
prepaid Rent that has been collected for each individual Mortgaged Property
more than one (1) month in advance of its due date,


 


(C)           monthly operating
financial statements for the last twelve (12) months, including a comparison on
a year-to-date basis to budget and prior year, for each individual Mortgaged
Property and, on a consolidated basis, for Borrower, and


 


85

















 


(D)          a monthly occupancy
report which includes data quantifying the total number of Homesites, beginning
occupancy, monthly move-in and move-out data for residents, rentals and change
of occupancy, ending monthly occupancy, ending monthly occupancy percentage,
budgeted occupancy percentage, total rentals, rentals as a percentage of
Homesites, total occupied rentals, rental occupancy percentage, total
repossessions and repossessions as a percentage of total Homesites.


 


(vi)          Borrower shall furnish
to Lender, within fifteen (15) Business Days after request, such further
information with respect to the operation of the Mortgaged Property and the
financial affairs of Borrower as may be reasonably requested by Lender,
including all business plans prepared for Borrower.


 


(vii)         Borrower shall furnish to
Lender, within fifteen (15) Business Days after request, such further
information regarding any Plan or Multiemployer Plan and any reports or other
information required to be filed under ERISA as may be reasonably requested by
Lender in writing.


 


(viii)        At least thirty (30) days
prior to the end of each of Borrower’s Fiscal Years, Borrower shall submit or
cause to be submitted to Lender for its approval, such approval not to be
unreasonably withheld or delayed, an Operating Budget for Property Expenses,
Capital Improvement Costs, Leasing Commissions, and replacement reserve costs
for the next Fiscal Year for the Mortgaged Property.  Such Operating Budget may allow for a ten percent (10%) line item
variance.  Until so approved by Lender
for the subsequent Fiscal Year in accordance with the procedure set forth in
Section 5.1(r)(ix) below, the Operating Budget approved by Lender for the
preceding Fiscal Year shall remain in effect for purposes of Section 2.12; provided,
that for so long as such prior Operating Budget remains in effect, amounts set
forth in the prior Operating Budget with respect to Property Expenses shall be
deemed increased with respect to actual increases in Basic Carrying Costs and
non-discretionary utility expenditures and shall be deemed increased by three
percent (3%) with regard to discretionary items.  Promptly following the occurrence and during the continuance of
an Event of Default, the Borrower shall submit or cause to be submitted to
Lender a Working Capital Budget for the remainder of the Fiscal Year during
which such Event of Default occurs and by not later than the end of each of
Borrower’s Fiscal Years with respect to the subsequent Fiscal Year.


 


(ix)           Borrower shall submit
any proposed Operating Budget in writing sent by recognized overnight delivery
service or by registered or certified mail (and simultaneously shall contact
the Lender by telephone and by electronic mail) in accordance with the terms of
this Agreement (the “First Notice”), requesting Lender’s approval of
such Operating Budget.  Lender shall use
reasonable efforts to deliver to Borrower its written approval or disapproval
of the proposed Operating Budget within ten (10) Business Days after Lender
shall have received the First Notice. 
Unless Lender shall have approved the Operating Budget contained in the
First Notice, Lender’s approval shall be deemed to be withheld.  If Borrower does not receive Lender’s
response at the end of such ten (10) Business Days period, Borrower may
resubmit its written


 


86

















 


request to Lender (the “Second Notice”).  The Second Notice shall make reference to
the First Notice and shall bear the following legend in capital letters:


 


“LENDER’S
FAILURE TO RESPOND TO THIS REQUEST FOR APPROVAL WITHIN TEN (10) BUSINESS DAYS
FOLLOWING RECEIPT SHALL BE DEEMED TO CONSTITUTE LENDER’S CONSENT TO THE
OPERATING BUDGET DESCRIBED HEREIN.”


 


If Lender does not approve or disapprove the proposed
Operating Budget within ten (10) Business Days after Lender shall have received
Borrower’s Second Notice, Lender shall be deemed to have approved the proposed
Operating Budget.


 


(x)            Together with the
financial statements, rent rolls, operating statements and other documents and
information provided to Lender by or on behalf of Borrower under this Section,
Borrower also shall deliver to Lender a certification in form and substance
reasonably satisfactory to Lender, executed on behalf of Borrower by its chief
executive officer or chief financial officer (or by the individual Guarantor if
the Guarantor is an individual) stating that, to such officer’s or individual’s
knowledge, such financial statements, rent rolls, operating statements and
other documents and information are true and complete in all material respects.


 


(xi)           For purposes of this Section
5.1(r), all of the financial reporting requirements may be satisfied by the
Borrower posting the required deliveries on a secure website reasonably
satisfactory to the Lender and sending to the Lender and its servicer each
month an electronic mail communication notifying the Lender and its servicer of
the linkage to such website; provided that notwithstanding the foregoing, in
the event the Lender includes the Loan in a Secondary Market Transaction in
which Securities are issued or otherwise changes the identity of its servicer
to a Person other than the initial servicer identified to the Borrower as of
the Closing Date, then the Lender may require that such deliveries be made to
Lender and its servicer in hard copy and on diskette or through electronic mail
(including Microsoft Excel format), in form and substance reasonably acceptable
to Lender.


 


(s)           Operation of Mortgaged Property.  Borrower shall cause the operation of each
Mortgaged Property to be conducted at all times in a manner consistent with at
least the level of operation of such Mortgaged Property as of the Closing Date,
including, without limitation, the following:


 


(i)            to maintain or cause
to be maintained the standard of each Mortgaged Property at all times at a
level not lower than that maintained by prudent managers of similar facilities
or land in the region where the Mortgaged Property is located;


 


(ii)           to operate or cause to
be operated each Mortgaged Property in a prudent manner in compliance in all
material respects with applicable Legal Requirements and Insurance Requirements
relating thereto and maintain or cause to be maintained all


 


87

















 


material licenses, Permits and any other agreements
necessary for the continued use and operation of each Mortgaged Property; and


 


(iii)          to maintain or cause to
be maintained sufficient Inventory and Equipment of types and quantities at
each Mortgaged Property to enable Borrower to operate each Mortgaged Property
and to comply in all material respects with all Leases affecting each Mortgaged
Property.


 


(t)            Material Agreements.  Except for Leases and any Management Agreement complying with the
Loan Documents, Borrower shall not enter into or become obligated under any
material agreement pertaining to the Mortgaged Property, including without
limitation brokerage agreements, unless the same may be terminated without
cause and without payment of a penalty or premium, on not more than thirty (30)
days’ prior written notice.  Borrower
will (A) comply with the requirements of all present and future applicable
laws, rules, regulations and orders of any governmental authority in all
jurisdictions in which it is now doing business or may hereafter be doing
business, (B) maintain all material licenses and permits now held or hereafter
acquired by Borrower, and (C) perform, observe, comply and fulfill all of its obligations,
covenants and conditions contained in any material agreement pertaining to the
Mortgaged Property.


 


(u)           ERISA. 
Borrower shall deliver to Lender as soon as possible, and in any event
within ten days after Borrower knows or has reason to believe that any of the
events or conditions specified below with respect to any Plan or Multiemployer
Plan has occurred or exists, an Officer’s Certificate setting forth details
respecting such event or condition and the action, if any, that Borrower or its
ERISA Affiliate proposes to take with respect thereto (and a copy of any report
or notice required to be filed with or given to PBGC by Borrower or an ERISA
Affiliate with respect to such event or condition):


 


(i)            any reportable event,
as defined in Section 4043(b) of ERISA and the regulations issued thereunder,
with respect to a Plan, as to which PBGC has not by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within thirty (30)
days of the occurrence of such event (provided that a failure to meet the
minimum funding standard of Section 412 of the Code or Section 302 of ERISA,
including, without limitation, the failure to make on or before its due date a
required installment under Section 412(m) of the Code or Section 302(e) of ERISA,
shall be a reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code); and any request for a waiver under
Section 412(d) of the Code for any Plan;


 


(ii)           the distribution under
Section 4041(c) of ERISA of a notice of intent to terminate any Plan or any
action taken by Borrower or an ERISA Affiliate to terminate any Plan;


 


(iii)          the institution by PBGC
of proceedings under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by Borrower or
any ERISA Affiliate of Borrower of a notice from a Multiemployer Plan that such
action has been taken by PBGC with respect to such Multiemployer Plan;


 


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(iv)          the complete or partial
withdrawal from a Multiemployer Plan by Borrower or any ERISA Affiliate of
Borrower that results in material liability under Section 4201 or 4204 of ERISA
(including the obligation to satisfy secondary liability as a result of a purchaser
default) or the receipt by Borrower or any ERISA Affiliate of Borrower of
notice from a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or
has terminated under Section 4041A of ERISA;


 


(v)           the institution of a
proceeding by a fiduciary of any Multiemployer Plan against Borrower or any
ERISA Affiliate of Borrower to enforce Section 515 of ERISA, which proceeding
is not dismissed within thirty (30) days;


 


(vi)          the adoption of an
amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA, would result in the loss of tax-exempt status of the
trust of which such Plan is a part if Borrower or an ERISA Affiliate of
Borrower fails to timely provide security to the Plan in accordance with the
provisions of said Sections; and


 


(vii)         the imposition of a lien
or a security interest in connection with a Plan.


 


(v)           Intentionally Omitted.


 


(w)          Secondary Market Transaction.  Borrower acknowledges that Lender and its
successors and assigns may (i) sell the Loan to one or more investors as a
whole loan, (ii) participate the Loan to one or more investors, (iii) deposit
the Loan with a trust, which trust may sell certificates to investors evidencing
an ownership interest in the trust assets, or (iv) otherwise sell the Loan or
interests therein to investors (the transactions referred to in clauses (i) through (iv)
above are hereinafter each referred to as a “Secondary
Market Transaction”). 
Borrower shall cooperate with Lender in attempting to effect or
effecting any such Secondary Market Transaction and shall cooperate in
attempting to implement or implementing all requirements imposed by any Rating
Agency involved in any Secondary Market Transaction, including but not limited
to,


 


(i)            providing Lender an
estoppel certificate and such information, legal opinions and documents
(including updated non-consolidation opinions) relating to Borrower, the
Guarantor, the Member, the Mortgaged Property and any tenants of the Mortgaged
Property as Lender or the Rating Agencies or other Interested Parties (as
defined below), may reasonably request in connection with such Secondary Market
Transaction, including, without limitation, updated financial information, appraisals,
market studies, environmental reviews (Phase I’s and, if appropriate, Phase
II’s), Mortgaged Property condition reports and other due diligence
investigations together with appropriate verification of such updated
information and reports through letters of auditors and consultants, as of the
closing date of the Secondary Market Transaction,


 


(ii)           amending the Loan
Documents and Organizational Agreement of Borrower, updating and/or restating
officer’s certificates, title insurance and other closing items, and providing
updated representations and warranties in Loan Documents and such


 


89

















 


additional representations and warranties as may be
required by Lender or the Rating Agencies, provided such amendment or update
(1) shall not change any of the financial terms of the Loan or result in a
material increase in the Borrower’s obligations or a material decrease in the
Borrower’s rights and (2) with respect to any amendment of an Organizational
Agreement, must have been required by the Rating Agencies,


 


(iii)          participating in bank,
investors and Rating Agencies’ meetings if requested by Lender,


 


(iv)          upon Lender’s request,
amending the Loan Documents (and updating and/or restating officer’s
certificates, title insurance and other closing items in connection therewith)
to divide the Loan into a first and a second mortgage loan, or into a one or
more loans secured by mortgages and by ownership interests in Borrower in
whatever proportion Lender determines, 
which separated loans may have different interest rates and amortization
schedules (but with aggregated financial terms which are equivalent to that of
the Loan prior to such separation, including, so long as an Event of Default
has not occurred and is not continuing, a ratable allocation of prepayments
among the Loan components) and thereafter to engage in separate Secondary
Market Transactions with respect to all or any part of the indebtedness and
loan documentation, and


 


(v)           reviewing the offering
documents relating to any Secondary Market Transaction to ensure that all
information concerning Borrower, the Guarantor, the Mortgaged Property, and the
Loan is correct, and certifying to the accuracy thereof.


 


Lender shall be permitted to share all such information
with the investment banking firms, Rating Agencies, accounting firms, law firms
and other third-party advisory firms and trustees, purchasers, transferees,
assignees, trustees, servicers and actual or potential investors involved with
the Loan and the Loan Documents or the applicable Secondary Market Transaction
(collectively, “Interested Parties”).  Lender and all of the aforesaid Interested
Parties shall be entitled to rely on the information supplied by, or on behalf
of, Borrower.  Lender may publicize the
existence of the Loan in connection with its marketing for a Secondary Market
Transaction or otherwise as part of its business development.  Borrower shall provide such reasonable
access to the Mortgaged Property and personnel of the Manager and of Borrower’s
constituent members and the business and operations of all of the foregoing as
Lender or other Interested Parties may request in connection with any such
Secondary Market Transaction.  Borrower
understands that any such information may be incorporated into any offering
circular, prospectus, prospectus supplement, private placement memorandum or
other offering documents for any Secondary Market Transaction.  Without limiting the foregoing, Borrower and
Guarantor shall provide in connection with each of (i) a preliminary and a
final private placement memorandum or (ii) a preliminary and final prospectus
or prospectus supplement, as applicable (the documents referred to in the
foregoing clauses (i) and (ii), collectively, the “Disclosure
Documents”), an agreement certifying that Borrower and Guarantor
have examined such Disclosure Documents specified by Lender and that each such
Disclosure Document, as it relates to Borrower, Guarantor, any Affiliates, the
Mortgaged Property and Manager, does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading (a “Disclosure Certificate”).  Borrower and Guarantor shall indemnify,
defend, protect and hold harmless


 


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Lender, its Affiliates, directors, employees, agents
and each Person, if any, who controls Lender or any such Affiliate within the
meaning of Section 15 of the Securities Act of 1933 or Section 20 of the
Securities Exchange Act of 1934, and any other placement agent or underwriter
with respect to any Securitization or Secondary Market Transaction from and
against any losses, claims, damages, liabilities, costs and expenses
(including, without limitation, reasonable attorneys’ fees and disbursements)
that arise out of or are based upon any untrue statement of any material fact
contained in any Disclosure Certificate or other information or documents furnished
by Borrower, Guarantor or their Affiliates or in any representation or warranty
of any Borrower contained herein or in the other Loan Documents or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated in such information or necessary in order to make
the statements in such information not materially misleading.  In any Secondary Market Transaction, Lender
may transfer its obligations under this Loan Agreement and under the other Loan
Documents (or may transfer the portion thereof corresponding to the transferred
portion of the Indebtedness), and thereafter Lender shall be relieved of any
obligations hereunder and under the other Loan Documents arising after the date
of said transfer with respect to the transferred interest.  Each transferee investor shall become a
“Lender” hereunder.  The holders from
time to time of the Loan and/or any other interest of the “Lender” under this
Loan Agreement and the other Loan Documents may from time to time enter into
one or more co-lender or similar agreements in their discretion.  Borrower acknowledges and agrees that such
agreements, as the same may from time to time be amended, modified or restated,
may govern the exercise of the powers and discretionary authority of the Lender
hereunder and under the other Loan Documents, but Borrower shall be entitled to
rely upon any actions taken by Lender or the designated servicer(s) or agent(s)
for Lender, whether or not within the scope of its power and authority under
such other agreements.  Lender shall be
responsible for the payment of the expenses incurred by Lender in connection
with any Secondary Market Transaction, and if Lender requires Borrower’s
cooperation in connection with any Secondary Market Transaction, Borrower shall
be entitled to obtain reimbursement from Lender for reasonable out-of-pocket
costs and expenses,  including
reasonable legal fees and expenses, incurred by it in responding to Lender’s
requirements for cooperation hereunder.


 


(x)            Insurance.


 


(i)            Borrower, at its sole
cost and expense, shall keep the Improvements and Equipment insured (including,
but not limited to, any period of renovation, alteration and/or construction)
during the term of the Loan with the coverage and in the amounts required under
this Agreement for the mutual benefit of Borrower and Lender against loss or
damage by fire, lightning, wind and such other perils as are customarily
included in a standard “all-risk” or “special cause of loss” form and against
loss or damage by other risks and hazards covered by a standard extended
coverage insurance policy (including, without limitation, fire, lightning,
hail, hurricane, windstorm, tidal wave, explosion, acts of terrorism certified
under the Terrorism Risk Insurance Act of 2002, riot and civil commotion,
vandalism, malicious mischief, strike, water damage, sprinkler leakage,
collapse, burglary, theft, mold and microbial matter coverage arising as a
result of covered perils under the standard “all risk” policy and such other coverages
as may be reasonably required by Lender on the special form (formerly known as
an all risk form)).  Such insurance
shall be in an amount (i) equal to at least the greater of then full
replacement cost of the Improvements and Equipment (exclusive of the cost of


 


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foundations and footings), without deduction for
physical depreciation and the outstanding Principal Indebtedness, and (ii) such
that the insurer would not deem Borrower a co-insurer under said policies.  The policies of insurance carried in
accordance with this Section 5.1(x) shall
be paid not less than ten (10) days in advance of the due date thereof and
shall contain the “Replacement Cost Endorsement” with a waiver of
depreciation.  If terrorism coverage is
excluded on an “all-risk” basis, then Borrower shall obtain coverage for
terrorism and similar acts in the stand alone terrorism market.  Notwithstanding the foregoing, the terrorism
coverage may exclude non-certified Terrorism Risk Insurance Act of 2002
coverage (i.e. the actions of domestic actors).


 


(ii)           Borrower, at its sole
cost and expense, for the mutual benefit of Borrower and Lender, shall also
obtain and maintain or cause to be obtained and maintained during the entire
term of the Loan the following policies of insurance:


 


(A)          flood insurance, if any
part of the Mortgaged Property is located in an area identified by the Federal
Emergency Management Agency as an area having special flood hazards and in
which flood insurance has been made available under the National Flood
Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the
National Flood Insurance Reform Act of 1994 (and any amendment or successor act
thereto) in an amount at least equal to the maximum limit of coverage available
with respect to the Improvements and Equipment under said Act;


 


(B)           Comprehensive General
Liability insurance, including a broad form comprehensive general liability
endorsement and coverage for broad form property damage, contractual damages,
personal injuries (including death resulting therefrom) and a liquor liability
endorsement if liquor is sold on the Mortgaged Property, containing minimum
limits of liability of $1 million for both injury to or death of a person and
for property damage per occurrence and $3 million in the aggregate for the
Mortgaged Property, and such other liability insurance reasonably requested by
Lender; in addition, at least $25 million excess and/or umbrella liability
insurance shall be obtained and maintained for any and all claims, including
all legal liability imposed upon Borrower and all court costs and attorneys’
fees incurred in connection with the ownership, operation and maintenance of
the Mortgaged Property;


 


(C)           business interruption
insurance (including rental value) in an annual aggregate amount equal to the
estimated income from the Leases of each Mortgaged Property (including, without
limitation, the loss of all Rents and additional Rents payable by all of the
lessees under the Leases (whether or not such Leases are terminable in the
event of a fire or casualty)), such insurance to cover losses for a period of
twelve (12) months after the date of the fire or casualty in question, plus an
extended period of indemnity commencing at the time repairs are completed for a
period of not less than 30 days and to be increased or decreased, as
applicable, from time to time during the term of the Loan if, and when, the
gross revenues from the Leases of the Mortgaged Property


 


92

















 


materially increase or decrease, as applicable
(including, without limitation, increases from new Leases and renewal Leases
entered into in accordance with the terms of this Agreement), to reflect all
increased Rent and increased additional Rent payable by all of the lessees
under such renewal Leases and all Rent and additional Rent payable by all of
the lessees under such new Leases;


 


(D)          all risk physical loss
and damage coverage with respect to heating and air conditioning equipment, located
in, on, or about the Improvements, except the coverage required under this
clause (ii)(D) shall not be required to be maintained as a separate policy and
may be included as part of the coverages provided under clause (i);


 


(E)           worker’s compensation
insurance coverage (in amounts not less than the statutory minimums for all
persons employed by Borrower or its tenants at the Mortgaged Property and in
compliance with all other requirements of applicable local, state and federal
law) and “Employers Liability” insurance in amounts not less than required by
statute;


 


(F)           during any period of
repair or restoration, builder’s “all risk” insurance in an amount equal to not
less than the full insurable value of the Mortgaged Property against such risks
(including, without limitation, fire and extended coverage and collapse of the
Improvements to agreed limits) as Lender may request, in form and substance
acceptable to Lender;


 


(G)           if reasonably required
by Lender with respect to any zoning matter that is reasonably likely to
materially adversely affect the value of any Mortgaged Property, ordinance or
law coverage to compensate for the cost of demolition, increased cost of
construction, and loss to any undamaged portions of the Improvements, if (a)
the Lender’s title insurance policy does not contain a zoning endorsement (ALTA
3.1 with parking added) or (b) the current use of the Mortgaged Property or the
Improvements themselves are or become “nonconforming” pursuant to the
applicable zoning regulations, unless full rebuildability following casualty is
otherwise permitted under such zoning regulations notwithstanding such
nonconformity;


 


(H)          if required by Lender as
a result of any Mortgaged Property being located in an area with a high degree
of seismic activity, earthquake damage insurance in an amount and form
acceptable to Lender;


 


(I)            such other insurance
as may from time to time be reasonably required by Lender in order to protect
its interests with respect to the Loan and the Mortgaged Property and to conform
such requirements to then current standards for a Secondary Market Transaction.


 


(iii)          All policies of
insurance (the “Policies”) required
pursuant to this Section 5.1(x):


 


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(A)          shall be issued by an insurer
approved by Lender which has a claims paying ability rating of not less than
“AA” (or the equivalent) by Rating Agencies satisfactory to Lender (one of
which shall be S&P) and A:XIII or better as to claims paying ability by AM
Best, provided, that notwithstanding the foregoing, (1) in the event American
Modern Insurance shall be the insurer providing the standard all-risk insurance
policy, then such insurer shall not be required to satisfy such claims paying
ability rating by the Rating Agencies (but will be required to have and
maintain a claims paying ability rating by AM Best of A+:VIII or better), so
long as the Borrower delivers to the Lender evidence reasonably satisfactory to
the Lender that the insurer has purchased reinsurance with respect to not less
than 70% of such policy from a reinsurer with a claims paying ability rating by
the Rating Agencies of not less than “A” (or the equivalent) by Rating Agencies
satisfactory to the Lender (one of which shall be S&P) and (2) the insurer
providing the worker’s compensation insurance coverage shall only be required
to maintain a claims paying ability rating of not less than “A” (or the
equivalent) by Rating Agencies satisfactory to the Lender (one of which shall
be S&P),


 


(B)           shall name Lender as an
additional insured and contain a standard noncontributory mortgagee clause and
a Lender’s Loss Payable Endorsement, or their equivalents, naming Lender
(and/or such other party as may be designated by Lender) as the party to which
all payments made by such insurance company shall be paid,


 


(C)           shall be maintained
throughout the term of the Loan without cost to Lender,


 


(D)          shall contain such
provisions as Lender deems reasonably necessary or desirable to protect its
interest (including, without limitation, endorsements providing that neither
Borrower, Lender nor any other party shall be a co-insurer under said Policies
and that Lender shall receive at least thirty (30) days prior written notice of
any modification, reduction or cancellation),


 


(E)           shall contain a waiver
of subrogation against Lender,


 


(F)           shall be for a term of
not less than one year,


 


(G)           shall provide for
claims to be made on an occurrence basis,


 


(H)          shall contain an agreed
value clause updated annually (if the amount of coverage under such policy is
based upon the replacement cost of the Mortgaged Property),


 


(I)            shall designate Lender
as “mortgagee and loss payee” (except general public liability and excess
liability, as to which Lender shall be named as additional insured),


 


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(J)            shall be issued by an
insurer licensed in the state in which the Mortgaged Property is located,


 


(K)          shall provide that
Lender may, but shall not be obligated to, make premium payments to prevent any
cancellation, endorsement, alteration or reissuance, and such payments shall be
accepted by the insurer to prevent same, and


 


(L)           shall be reasonably
satisfactory in form and substance to Lender and reasonably approved by Lender
as to amounts, form, risk coverage, deductibles, loss payees and insureds to
the extent not otherwise specified in this Section
5.1(x).  All property damage
insurance policies (except for flood and earthquake policies) must
automatically reinstate after each loss.


 


Copies of said Policies, certified as true and correct
by Borrower, or insurance certificates thereof, shall be delivered to
Lender.  Not later than ten (10) days
prior to the expiration date of each of the Policies, Borrower shall deliver to
Lender satisfactory evidence of the renewal of each Policy.  The insurance coverage required under this Section 5.1(x) may be effected under a blanket
policy or policies covering the Mortgaged Property and other property and
assets not constituting a part of the Collateral; provided
that any such blanket policy shall provide at least the same amount and form of
protection as would a separate policy insuring the Mortgaged Property
individually, which amount shall not be less than the amount required pursuant
to this Section 5.1(x) and which shall in any
case comply in all other respects with the requirements of this Section 5.1(x). 
Upon demand therefor, Borrower shall reimburse Lender for all of
Lender’s or its designee’s reasonable costs and expenses incurred in obtaining
any or all of the Policies or otherwise causing the compliance with the terms
and provisions of this Section 5.1(x),
including (without limitation) obtaining updated flood hazard certificates and
replacement of any so-called “forced placed” insurance coverages to the extent
Borrower was required to obtain and maintain any such Policy or Policies
hereunder and failed to do so.  Borrower
shall pay the premiums for such Policies (the “Insurance
Premiums”) as the same become due and payable and shall furnish to
Lender evidence of the renewal of each of the Policies with receipts for the
payment of the Insurance Premiums or other evidence of such payment reasonably
satisfactory to Lender (provided, however, that Borrower is not required to
furnish such evidence of payment to Lender in the event that such Insurance
Premiums have been paid by Lender).  If
Borrower does not furnish such evidence and receipts at least ten (10) days
prior to the expiration of any expiring Policy, then Lender may procure, but
shall not be obligated to procure, such insurance and pay the Insurance
Premiums therefor, and Borrower agrees to reimburse Lender for the cost of such
Insurance Premiums promptly on demand. 
Within thirty (30) days after request by Lender, Borrower shall obtain
such increases in the amounts of coverage required hereunder as may be
reasonably requested by Lender, based on then industry-standard amounts of
coverage then being obtained by prudent owners of properties similar to the
Mortgaged Property in the same applicable market region as the Mortgaged
Property.  Borrower shall give Lender
prompt written notice if Borrower receives from any insurer any written
notification or threat of any actions or proceedings regarding the non-


 


95

















 


compliance or non-conformity of the Mortgaged Property
with any insurance requirements.


 


(iii)          If the Mortgaged
Property shall be damaged or destroyed, in whole or in part, by fire or other
casualty, Borrower shall give prompt notice thereof to Lender.


 


(A)          In case of loss covered
by Policies, Lender may either (a) jointly with a Borrower settle and adjust
any claim and agree with the insurance company or companies on the amount to be
paid on the loss or (b) allow Borrower to agree with the insurance company or
companies on the amount to be paid upon the loss; provided,
that Borrower may settle and adjust losses without participation by Lender
aggregating not in excess of 1% of the Principal Indebtedness, agree with the
insurance company or companies on the amount to be paid upon the loss and
collect and receipt for any such Insurance Proceeds; provided,
further, that if (x) at the time of the
settlement of such claim an Event of Default has occurred and is continuing or
(y) Lender and Borrower are unable to agree upon a joint settlement or (z)
Lender disapproves of Borrower’s proposed settlement with the insurance
company, then Lender shall settle and adjust such claim without the consent of
Borrower, and for such purpose is hereby irrevocably appointed as Borrower’s attorney-in-fact,
coupled with an interest.  In any such
case Lender shall and is hereby authorized to collect and receipt for any such
Insurance Proceeds subject to and to the extent provided for in this Agreement.  The reasonable out-of-pocket expenses incurred
by Lender in the adjustment and collection of Insurance Proceeds shall become
part of the Indebtedness and be secured by the Mortgages and shall be
reimbursed by Borrower to Lender upon demand therefor.


 


(B)           In the event of any
insured damage to or destruction of the Mortgaged Property or any part thereof
(herein called an “Insured Casualty”) where
(1) the aggregate amount of the loss, as reasonably determined by an
Independent insurance adjuster, is less than thirty percent (30%) of the
Lender’s reasonable estimate of the fair market value of the individual
Mortgaged Property affected by the damage or destruction, (2) in the reasonable
judgment of Lender, the Mortgaged Property can be restored, replaced and/or
rebuilt (collectively, the “Restoration”)
by not later than the first to occur of (a) twelve (12) months after the date
of casualty and (b) the expiration of the business interruption insurance and,
in any case, not later than six (6) months prior to the Maturity Date to an
economic unit substantially in the condition it was in immediately prior to the
Insured Casualty and in compliance with all zoning, building and other
applicable Legal Requirements (the “Pre-Existing
Condition”) not less materially valuable (including an assessment of
the impact of the termination of any Leases due to such Insured Casualty) and
not less useful than the same was prior to the Insured Casualty, (3) Lender
reasonably determines that the rental income of the Mortgaged Property, after
the Restoration thereof to the Pre-Existing Condition, will be sufficient to
meet all Operating Expenses, payments for Reserves and payments of principal
and interest under the Loan and satisfy the Debt Service Coverage Test, and (4)
tenant leases requiring payment of annual rent equal to at


 


96

















 


least seventy-five percent (75%) of the gross revenues
from the Mortgaged Property during the twelve (12) month period immediately
preceding the date of such fire or other casualty remain in full force and
effect during and after the Restoration of the Property (subject to the rent
abatement provisions thereof applicable as a result of the casualty, so long as
such abatement will end, and full rental payments shall resume, upon
substantial completion of the Restoration), or if Lender otherwise elects to
allow a Borrower to restore the Mortgaged Property, then, if no Event of
Default shall have occurred and be continuing, the Insurance Proceeds (after
reimbursement of any reasonable out-of-pocket expenses incurred by Lender in
connection with the collection of any applicable Insurance Proceeds) shall be
made available to reimburse Borrower for the cost of restoring, repairing,
replacing or rebuilding the Mortgaged Property or part thereof subject to the
Insured Casualty, as provided for below. 
Borrower hereby covenants and agrees to commence and diligently to
prosecute such Restoration of the affected Mortgaged Property as nearly as
possible to the Pre-Existing Condition. 
Borrower shall pay all out-of-pocket costs (and if required by Lender,
Borrower shall deposit the total thereof with Lender in advance) of such
Restoration in excess of the Insurance Proceeds made available pursuant to the
terms hereof.


 


(C)           Except as provided
above, the Insurance Proceeds collected upon any Insured Casualty shall, at the
option of Lender in its sole discretion, be applied to the payment of the
Indebtedness or applied to the cost of Restoration of the affected Mortgaged
Property or part thereof subject to the Insured Casualty, in the manner set
forth below.


 


(D)          Regardless of whether
Insurance Proceeds, if any, are sufficient or are made available to Borrower
for the Restoration of any portion of the affected Mortgaged Property, Borrower
covenants to complete such restoration of the affected Mortgaged Property to be
of at least comparable value as prior to such damage or destruction, all to be
effected in accordance with Legal Requirements and plans and specifications
approved in advance by Lender, such approval not to be unreasonably withheld or
delayed.


 


(E)           In the event Borrower
is entitled to reimbursement out of Insurance Proceeds, such proceeds shall be
held by Lender in the Loss Proceeds Account and disbursed from time to time as
the Restoration progresses upon Lender being furnished with (1) evidence
reasonably satisfactory to it (which evidence may include inspection(s) of the
work performed) that the Restoration covered by the disbursement has been
completed in accordance with plans and specifications approved by Lender, (2)
evidence reasonably satisfactory to it of the estimated cost of completion of
the Restoration, (3) funds, or, at Lender’s option, assurances reasonably
satisfactory to Lender that such funds are available and sufficient in addition
to the Insurance Proceeds to complete the proposed Restoration, and (4) such
architect’s certificates, waivers of lien, contractor’s sworn statements, title
insurance endorsements, bonds and other evidences of cost, payment and
performance of the foregoing Restoration as Lender may reasonably require and
approve.  Lender may, in any event,
require that all plans and specifications for


 


97

















 


such Restoration be submitted to and reasonably
approved by Lender prior to commencement of work.  Lender may retain a construction consultant to inspect such work
and review Borrower’s request for payments and Borrower shall, on demand by
Lender, reimburse Lender for the reasonable fees and disbursements of such
consultant.  No payment made prior to
the final completion of the Restoration shall exceed ninety percent (90%) of
the hard construction costs value of the work performed from time to time
(except for restoration work on a trade by trade basis or on an hourly basis
for professional services in which event, payment may be made in full upon the
completion of such work).  No funds
other than Insurance Proceeds shall be disbursed prior to disbursement of such
proceeds; and, at all times, the undisbursed balance of such Insurance Proceeds
remaining in the Loss Proceeds Account, together with funds deposited therein
to pay the costs of the Restoration by or on behalf of Borrower, shall be at
least sufficient in the reasonable judgment of Lender to pay for the cost of
completion of the Restoration free and clear of all liens or claims for lien,
except for Permitted Encumbrances.  Any
surplus which may remain out of Insurance Proceeds held by Lender after payment
of such costs of restoration, repair, replacement or rebuilding shall, at the
option of Lender in its sole discretion, be applied to the payment of the
Indebtedness or be paid to Borrower so long as no Event of Default has occurred
and is continuing.


 


(F)           Borrower shall not
carry separate insurance, concurrent in kind or form or contributing in the
event of loss, with any insurance required under this Agreement that would be
considered “co-insurance” or adversely affect the ability to collect under a
policy of insurance required hereunder.


 


(y)           Condemnation.


 


(i)            Borrower shall promptly
give Lender written notice of the actual or threatened commencement of any
proceeding for a Taking and shall deliver to Lender copies of any and all
papers served in connection with such proceedings.  Lender is hereby irrevocably appointed as Borrower’s
attorney-in-fact, coupled with an interest, with exclusive power to collect,
receive and retain any Condemnation Proceeds for said Taking.  With respect to any compromise or settlement
in connection with such proceeding, Lender shall jointly with Borrower
compromise and reach settlement unless at the time of such Taking an Event of
Default has occurred and is continuing and the Indebtedness has been
accelerated, in which event Lender shall compromise and reach settlement
without the consent of Borrower.  Notwithstanding the foregoing provisions of this Section 5.1(y), Borrower is authorized to
negotiate, compromise and settle, without participation by Lender, Condemnation
Proceeds of up to 1% of the Principal Indebtedness in connection with any
Taking.  Notwithstanding any Taking,
Borrower shall continue to pay the Indebtedness at the time and in the manner
provided for in this Agreement and the other Loan Documents and the
Indebtedness shall not be reduced except in accordance herewith.


 


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(ii)           Borrower shall cause
the Condemnation Proceeds to be paid directly to Lender.  Lender may, in its sole discretion, apply
any such Condemnation Proceeds to the reduction or discharge of the
Indebtedness (whether or not then due and payable).


 


(iii)          With respect to a Taking
in part, which shall mean any Taking which does not render the affected
Mortgaged Property physically or economically unsuitable in the reasonable
judgment of Lender for the use to which it was devoted prior to the Taking,
Borrower shall cause the Condemnation Proceeds to be paid to Lender as
described above, and if Lender does not elect to apply the same to the
Indebtedness as provided in Section 5.1(y)(ii)
above, Lender shall deposit such Condemnation Proceeds in the Loss Proceeds
Account and the same shall be made available for application to the cost of
Restoration of the affected Mortgaged Property and disbursed from time to time
as the Restoration progresses upon Lender being furnished with (1) evidence
reasonably satisfactory to it (which evidence may include inspection(s) of the
work performed) that the Restoration covered by the disbursement has been
completed in accordance with plans and specifications approved by Lender, (2)
evidence reasonably satisfactory to it of the estimated cost of completion of
the Restoration, (3) funds, or, at Lender’s option, assurances satisfactory to
Lender that such funds are available and sufficient in addition to the
Condemnation Proceeds to complete the proposed Restoration, and (4) such
architect’s certificates, waivers of lien, contractor’s sworn statements, title
insurance endorsements, bonds and other evidences of cost, payment and
performance of the foregoing repair, restoration, replacement or rebuilding as
Lender may reasonably require and approve.


 


(iv)          Regardless of whether
Condemnation Proceeds are made available for such purpose, Borrower hereby
covenants to complete the Restoration of the affected Mortgaged Property as
nearly as possible to the Pre-Existing Condition and to be of at least
comparable value and, to the extent commercially practicable, of substantially
the same character as prior to the Taking, all to be effected in accordance
with applicable law and plans and specifications reasonably approved in advance
by Lender.  Borrower shall pay all costs
(and if required by Lender, Borrower shall deposit the total thereof with
Lender in advance) of such Restoration in excess of the Condemnation Proceeds
made available pursuant to the terms hereof. 
Lender may, in any event, require that all plans and specifications for
such Restoration be submitted to and reasonably approved by Lender prior to
commencement of work.  Lender may retain
a construction consultant to inspect such work and review any request by
Borrower for payments and Borrower shall, on demand by Lender, reimburse Lender
for the reasonable fees and disbursements of such consultant.  No payment made prior to the final
completion of the Restoration shall exceed ninety percent (90%) of the hard
construction costs value of the construction work performed from time to time
(except for restoration work on a trade by trade basis or on an hourly basis
for professional services in which event, payment may be made in full upon the
completion of such work); funds other than Condemnation Proceeds shall be
disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of Lender, together
with funds deposited for that purpose or irrevocably committed to the repayment
of Lender by or on behalf of Borrower for that purpose, shall be at least
sufficient in the reasonable judgment of Lender to pay for the cost of
completion of the restoration, repair, replacement or


 


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rebuilding, free and clear of all liens or claims for
lien.  Any surplus which may remain out
of Condemnation Proceeds held by Lender after payment of such costs of
restoration, repair, replacement or rebuilding shall, at the option of Lender
in its sole discretion, be applied to the payment of the Indebtedness or be
paid to Borrower so long as no Event of Default has occurred and is continuing.


 


(v)           If the affected
Mortgaged Property is sold, through foreclosure or otherwise, prior to the
receipt by Lender of any such Condemnation Proceeds to which it is entitled
hereunder, Lender shall have the right, whether or not a deficiency judgment on
the Note shall have been sought, recovered or denied, to have reserved in any
foreclosure decree a right to receive said award or payment, or a portion
thereof sufficient to pay the Indebtedness. 
In no case shall any such application reduce or postpone any payments
otherwise required pursuant to this Agreement, other than the final payment on
the Note.


 


(z)            Leases and Rents.


 


(i)            Borrower absolutely
and unconditionally assigns to Lender, Borrower’s right, title and interest in
all current and future Leases and Rents as collateral for the Loan, it being
intended by Borrower that this assignment constitutes a present, absolute
assignment and not an assignment for additional security only.  Such assignment to Lender shall not be
construed to bind Lender to the performance of any of the covenants, conditions
or provisions contained in any such Lease or otherwise impose any obligation
upon Lender.  Borrower shall execute and
deliver to Lender such additional instruments, in form and substance reasonably
satisfactory to Lender, as may hereafter be reasonably requested in writing by
Lender to further evidence and confirm such assignment.  Nevertheless, subject to the terms of this Section 5.1(z), Lender grants to Borrower a
license to lease, maintain, operate and manage the Mortgaged Property and to
collect, use and apply the Rents in accordance with the terms hereof and
otherwise act as the landlord under the Leases, which license shall be deemed
automatically revoked upon the occurrence and during the continuance of an
Event of Default under this Agreement.  Any
portion of the Rents held by Borrower shall be held in trust for the benefit of
Lender for use in the payment of the Indebtedness.  Upon the occurrence of an Event of Default and during the
continuance thereof, the license granted to Borrower herein shall automatically
be revoked, and Lender shall immediately be entitled to possession of all
Rents, whether or not Lender enters upon or takes control of the Mortgaged
Property.  Lender is hereby granted and
assigned by Borrower the right, at its option, upon revocation of the license
granted herein, to enter upon the Mortgaged Property in person, by agent or by
court-appointed receiver to collect the Rents. 
Any Rents collected after the revocation of the license shall be applied
toward payment of the Indebtedness as set forth in Section
2.8 hereof.


 


(ii)           All Leases entered into
by Borrower shall provide for rental rates comparable to then-existing local
market rates and terms and conditions commercially reasonable and consistent
with then-prevailing local market terms and conditions for similar type
properties, and in no event shall Borrower, absent Lender’s prior written
consent, which consent shall not be unreasonably withheld or delayed, enter
into any


 


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Leases (a) other than leases of Homesites to owners
and occupants of residential manufactured homes or mobile homes having lease
terms not in excess of two years, and (b) with any Affiliates of Borrower,
except as indicated in Schedule 7 attached
hereto.  Borrower shall furnish Lender
with (1) detailed term sheets in advance in the case of any Leases,
modifications, amendments or renewals for which Lender’s consent is required
and (2) in the case of any other Leases, executed copies of such Leases upon
written request.  All renewals or
amendments or modifications of Leases that do not satisfy the requirements of
the first sentence of this Section 5.1(z)(ii)
shall be subject to the prior approval of Lender, which approval shall not be
unreasonably withheld or delayed.  All
Leases entered into after the Closing Date with new tenants (i.e. not renewals
of existing tenants as of the Closing Date) shall be written on the standard
lease form for new tenants previously approved by Lender which form as of the
Closing Date is set forth on Schedule 10 attached hereto; provided that
notwithstanding the foregoing, the Borrower may modify any standard lease form
without such approval to the extent necessary to conform such form to any
applicable Legal Requirements (and, upon reasonable request of the Lender, the
Borrower shall notify the Lender in writing with respect to such
modification).  The Borrower shall not
materially change the standard lease form without Lender’s prior written
consent, which consent shall not be unreasonably withheld or delayed, or except
as necessary to comply with applicable Legal Requirements.  Borrower,


 


(A)          shall observe and
perform all of the material obligations imposed upon the lessor under the
Leases and shall not do or permit to be done anything to materially impair the
value of the Leases as security for the Indebtedness;


 


(B)           shall not execute any
other assignment of lessor’s interest in any of the Leases or Rents;


 


(C)           shall enforce all of
the material terms, covenants and conditions contained in the Leases upon the
part of the lessee thereunder to be observed or performed and shall effect a
termination or diminution of the obligations of tenants under leases, only in a
manner that a prudent owner of a similar property to the Mortgaged Property
would enforce such terms covenants and conditions or effect such termination or
diminution in the ordinary course of business;


 


(D)          except as otherwise set
forth in the Monthly Statement submitted to Lender, shall not collect any of
the Rents more than one (1) month in advance; and


 


(E)           shall not convey or
transfer or suffer or permit a conveyance or transfer of the Mortgaged Property
or of any interest therein so as to effect a merger of the estates and rights
of, or a termination or diminution of the obligations of, lessees thereunder.


 


(iii)          Borrower shall deposit
security deposits of lessees which are turned over to or for the benefit of
Borrower or otherwise collected by or on behalf of Borrower, into the Security
Deposit Account and shall not commingle such funds with any other funds


 


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of Borrower. 
Any bond or other instrument which Borrower is permitted to hold in lieu
of cash security deposits under any applicable Legal Requirements shall be
maintained in full force and effect unless replaced by cash deposits as
hereinabove described, shall, if permitted pursuant to Legal Requirements, name
Lender as payee or mortgagee thereunder (or at Lender’s option, be fully
assignable to Lender) and shall, in all respects, comply with any applicable
Legal Requirements and otherwise be reasonably satisfactory to Lender.  Borrower shall, upon request, provide Lender
with evidence reasonably satisfactory to Lender of Borrower’s compliance with
the foregoing.  Upon the occurrence and
during the continuance of any Event of Default, Borrower shall, upon Lender’s
request, if permitted by any applicable Legal Requirements, turn over to Lender
the security deposits (and any interest theretofore earned thereon) with
respect to all or any portion of the Mortgaged Property, to be held by Lender
subject to the terms of the Leases.


 


(aa)         Maintenance of Mortgaged Property.  Borrower shall cause the Mortgaged Property
to be maintained in a good and safe condition and repair, subject to wear and
tear and damage caused by casualty or condemnation.  The Improvements and the Equipment shall not be removed,
demolished or altered (except for (1) normal replacement of the Equipment, (2)
Improvements contemplated in an approved Operating Budget or pursuant to Leases
in effect from time to time, (3) removals, demolition or alterations that do
not cost more than 1% of the Principal Indebtedness or (4) an emergency which
the Borrower shall have notified the Lender of in writing, including the action
taken to remediate) without the consent of Lender which consent shall not be
unreasonably withheld or delayed. 
Except with respect to an Insured Casualty which shall be governed by
the terms and conditions provided herein, Borrower shall, or shall cause any
tenants obligated under their respective Leases to, promptly repair, replace or
rebuild any part of the Mortgaged Property that becomes damaged, worn or
dilapidated.  Borrower shall complete
and pay for any structure at any time in the process of construction or repair
on the Land.  Borrower shall not
initiate, join in, or consent to any change in any private restrictive
covenant, zoning law or other public or private restriction, limiting or
defining the uses which may be made of any Mortgaged Property or any part
thereof without the written consent of Lender, which consent shall not be
unreasonably withheld or delayed.  If
under applicable zoning provisions the use of all or any portion of the
Mortgaged Property is or shall become a nonconforming use, Borrower will not
cause or permit such nonconforming use to be discontinued or abandoned if such
discontinuance of abandonment would cause such nonconforming use to no longer
be permitted without the express written consent of Lender, which consent shall
not be unreasonably withheld or delayed. 
Borrower shall not (i) change the use of any of the Land or Improvements
in any material respect, (ii) permit or suffer to occur any waste on or to any
Mortgaged Property or to any portion thereof or (iii) take any steps whatsoever
to convert any Mortgaged Property, or any portion thereof, to a condominium or
cooperative form of management.


 


(bb)         Prohibited
Persons.  Borrower covenants and agrees
to deliver (from time to time) to Lender any certification or other evidence as
may be requested by Lender in its sole and absolute discretion, confirming
that: (i) neither Borrower, Member, General Partner, Guarantor nor their
respective officers, directors, partners, members or majority-owned Affiliates
is a Prohibited Person; and (ii) neither Borrower, Member, General Partner,
Guarantor nor their respective officers, directors, partners, members or
majority-owned Affiliates has engaged in any


 


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business,
transaction or dealings with a Person known to Borrower to be a Prohibited
Person, including, but not limited to, the making or receiving of any
contribution of funds, goods, or services, to or for the benefit of a Person
known to Borrower to be a Prohibited Person.


 


ARTICLE VI.

NEGATIVE COVENANTS


 


Section 6.1.            Negative Covenants.  Borrower covenants and agrees that, until
payment in full of the Indebtedness, it will not do, directly or indirectly,
any of the following unless Lender consents thereto in writing:


 


(a)           Liens on the Mortgaged Property.  Incur, create, assume, become or be liable
in any manner with respect to, or permit to exist, except as permitted by Section 5.1(b) above, any Lien with respect to
any Mortgaged Property or any portion thereof, except: (i) Liens in favor of
Lender and (ii) the Permitted Encumbrances.


 


(b)           Ownership and Transfer.  Except as expressly permitted by or pursuant to this Agreement or
the other Loan Documents, own any property of any kind other than the Mortgaged
Property, or Transfer any Mortgaged Property or any portion thereof.


 


(c)           Other Borrowings.  Incur, create, assume, become or be liable in any manner with
respect to Other Borrowings, other than the Crossed Loans.


 


(d)           Dissolution; Merger or Consolidation.  Dissolve, terminate, liquidate, merge with
or consolidate into another Person.


 


(e)           Change In Business.  Make any material change in the scope or nature of its business
objectives, purposes or operations, or undertake or participate in activities
other than the continuance of its present business.


 


(f)            Debt Cancellation.  Cancel or otherwise forgive or release any material claim or debt
owed to Borrower by any Person, except for adequate consideration or in the
ordinary course of Borrower’s business.


 


(g)           Affiliate Transactions.  Except for fees payable to Manager under the Management
Agreement, (i) pay any management, consulting, director or similar fees to any
Affiliate of Borrower or to any director or manager (other than any customary
fees of the Independent Manager), officer or employee of Borrower, (ii)
directly or indirectly enter into or permit to exist any transaction (including
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of Borrower or with any director, officer or
employee of any Affiliate of Borrower, except transactions in the ordinary
course of and pursuant to the reasonable requirements of the business of
Borrower and upon fair and reasonable terms which are no less favorable to
Borrower than would be obtained in a comparable arm’s length transaction with a
Person that is not an Affiliate of Borrower, or (iii) make any payment or
permit any payment to be made to any Affiliate of Borrower when or as to any
time when any Event of Default shall exist.


 


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(h)           Creation of Easements.  Except as expressly permitted by or pursuant to the Mortgages or
this Agreement, create, or permit any Mortgaged Property or any part thereof to
become subject to, any easement, license or restrictive covenant, other than a
Permitted Encumbrance, provided, that the
consent of Lender shall not be unreasonably withheld or delayed to the extent
that any such easement, license or restrictive covenant is reasonably necessary
for the continued use, enjoyment, access to or operation of the applicable
Mortgaged Property.


 


(i)            Misapplication of Funds.  Distribute any Rents or Moneys received from
Accounts in violation of the provisions of Section 2.12, or fail to
pledge any security deposit to Lender, or misappropriate any security deposit
or portion thereof.


 


(j)            Certain Restrictions.  Amend, modify or waive any of its rights under the Master
Homesite Lease Documentation, provided that Borrower shall, not less frequently
than once each six months, enter into amendments contemplated under paragraph 1
of the Master Homesite Lease, in form reasonably satisfactory to Lender and
provide the same to Lender.  Borrower
shall enforce its rights under the Master Homesite Lease Documentation in a
commercially reasonably manner, including its right to collect and retain
additional Master Lease Deposits from time to time as provided in the Master
Lease, which Borrower shall promptly deposit into the Master Lease Deposit
Account.


 


(k)           Assignment of Licenses and Permits.  Assign or transfer any of its interest in
any Permits pertaining to any Mortgaged Property, or assign, transfer or remove
or permit any other Person to assign, transfer or remove any records pertaining
to any Mortgaged Property.


 


(l)            Place of Organization.  Change its jurisdiction of organization, creation or formation,
as applicable, without giving Lender at least fifteen (15) days’ prior written
notice thereof and promptly providing Lender such information as Lender may
reasonably request in connection therewith.


 


(m)          Leases. 
Enter into, amend or cancel Leases, except as permitted by this
Agreement.


 


(n)           Management Agreement.  Except in accordance with this Agreement, (i) terminate or cancel
the Management Agreement, (ii) consent to either the reduction of the term of
or the assignment of the Management Agreement, (iii) increase or consent to the
increase of the amount of any charges under the Management Agreement, or (iv)
otherwise modify, change, supplement, alter or amend, or waive or release any
of its rights and remedies under, the Management Agreement in any material
respect.


 


(o)           Plans and Welfare Plans.  Knowingly engage in or permit any
transaction in connection with which Borrower or any ERISA Affiliate could be
subject to either a material civil penalty or tax assessed pursuant to Section
502(i) or 502(1) of ERISA or Section 4975 of the Code, permit any Welfare Plan
to provide benefits, including without limitation, medical benefits (whether or
not insured), with respect to any current or former employee of Borrower beyond
his or her retirement or other termination of service other than (i) coverage
mandated by applicable law, (ii) death or disability benefits that have been
fully provided for by paid up


 


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insurance or otherwise or (iii) severance benefits
(unless such coverage is provided after notification of and with the reasonable
approval of Lender or pursuant to an employment or severance agreement entered
into in the ordinary course of business consistent with past practice), permit
the assets of Borrower to become “plan assets”, whether by operation of law or
under regulations promulgated under ERISA or adopt, amend (except as may be
required by applicable law) or materially increase the amount of any benefit or
amount payable under, or permit any ERISA Affiliate to adopt, amend (except as
may be required by applicable law) or materially increase the amount of any
benefit or amount payable under, any Plan or Welfare Plan, except for normal
increases in the ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase in benefits
expense to Borrower or any ERISA Affiliate.


 


(p)           Transfer of Ownership Interests.  Permit any Transfer of a direct or indirect
ownership interest or voting right in Borrower (other than a Permitted
Transfer).


 


(q)           Equipment and Inventory.  Except pursuant to the Management Agreement,
permit any Equipment owned by Borrower to be removed at any time from any
Mortgaged Property unless the removed item is consumed or sold in the usual and
customary course of business, removed temporarily for maintenance and repair
or, if removed permanently, replaced by an article of equivalent suitability
and not materially less value, owned by Borrower free and clear of any Lien
(other than Permitted Encumbrances).


 


(r)            Management Fees. 
Pay Borrower or any Affiliate of Borrower any management fees with
respect to the Mortgaged Property except for management fees paid to Manager
under the Management Agreement.


 


(s)           Prohibited Persons.  With respect to Borrower, Member, General Partner, Guarantor and
any of their respective officers, directors, partners, members or
majority-owned Affiliates: (i) conduct any business, or engage in any
transaction or dealing, with any Person known to Borrower to be a Prohibited
Person, including, but not limited to, the making or receiving of any
contribution of funds, goods, or services, to or for the benefit of a
Prohibited Person; or (ii) engage in or conspire to engage in any transaction
that evades or avoids, or has the purpose of evading or avoiding, or attempts
to violate, any of the prohibitions set forth in EO13224.


 


ARTICLE VII.

EVENT OF DEFAULT


 


Section 7.1.            Event of Default.  The occurrence of one or more of the
following events shall be an “Event of Default”
hereunder:


 


(a)           if
on any Payment Date Borrower fails to pay any Monthly Debt Service Payment due
and payable on such Payment Date, or if Borrower fails to make any scheduled
deposits into the Reserve Accounts when due and payable in accordance with the
provisions hereof;


 


(b)           if
Borrower fails to pay the outstanding Indebtedness on the Maturity Date;


 


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(c)           if
Borrower fails to pay or deposit any other amount payable or required to be
deposited pursuant to this Agreement or any other Loan Document when due and
payable in accordance with the provisions hereof or thereof, as the case may
be, and such failure continues for ten (10) days after Lender delivers written
notice thereof to Borrower  (other than
the failure of the Lender to transfer available funds from the Collection
Account to a Reserve Account pursuant to Section 2.12(b);


 


(d)           if
any representation or warranty made herein or in any other Loan Document, or in
any report, certificate, financial statement or other Instrument, agreement or
document furnished by Borrower, Member or Guarantor in connection with this
Agreement, the Note or any other Loan Document shall be false or materially
misleading as of the date such representation or warranty was made (or if such
representation or warranty relates to an earlier date, then as of such earlier
date);


 


(e)           if
Borrower or the Guarantor makes an assignment for the benefit of creditors;


 


(f)            if
a receiver, liquidator or trustee shall be appointed for Borrower or the
Guarantor or if Borrower or the Guarantor shall be adjudicated a bankrupt or
insolvent, or if any petition for bankruptcy, reorganization or arrangement
pursuant to federal bankruptcy law, or any similar federal or state law, shall
be filed by or against, consented to, or acquiesced in by, Borrower or the
Guarantor, or if any proceeding for the dissolution or liquidation of Borrower
or the Guarantor shall be instituted; provided,
however, that if such appointment,
adjudication, petition or proceeding was involuntary and not consented to by
Borrower or the Guarantor, upon the same not being discharged, stayed or
dismissed within ninety (90) days, or if Borrower or the Guarantor shall
generally not be paying its debts as they become due;


 


(g)           if
Borrower attempts to delegate its obligations or assign its rights under this
Agreement, any of the other Loan Documents or any interest herein or therein,
or if any Transfer of any Mortgaged Property or any interest therein occurs, or
any direct or indirect Transfer of any direct or indirect ownership interest in
Borrower occurs, other than in accordance with or as permitted under this
Agreement;


 


(h)           if
any breach or failure to perform any of the covenants in Article VI hereof
shall occur, which breach or failure to perform, in the case of Section
6.1(o) or (q) only, shall remain uncured for a period of thirty (30)
days after the occurrence of such breach or failure to perform or if any
material breach or failure to perform any of the covenants in Article VIII
hereof shall occur;


 


(i)            if
an Event of Default as defined or described in the Note or any other Loan
Document occurs, whether as to Borrower or the Mortgaged Property or any
portion thereof;


 


(j)            if
any of the assumptions made with respect to Borrower and its Affiliates in that
certain substantive non-consolidation opinion letter dated as of February
    , 2004 delivered by Holme Roberts & Owen LLP in
connection with the Loan is not true and correct in all respects;


 


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(k)           if
Borrower fails to maintain any insurance required to be maintained pursuant to Section 5.1(x) hereof;


 


(l)            if
any Crossed Loan Default shall occur under any of the Crossed Loan Documents;
and


 


(m)          if
Borrower shall fail to perform any of the terms, covenants or conditions of
this Agreement, the Note, the Mortgages or the other Loan Documents, other than
as specifically otherwise referred to above in this definition of “Event of Default,”
for ten (10) days after notice to Borrower from Lender or its successors or
assigns, in the case of any Default which can be cured by the payment of a sum
of money, or for thirty (30) days after notice from Lender or its successors or
assigns, in the case of any other Default (unless a longer notice period is
otherwise provided herein or in such other Loan Document); provided, however,
that if such non-monetary Default is susceptible of cure but cannot reasonably
be cured within such thirty (30) day period and such Borrower shall have
commenced to cure such Default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended for an additional thirty (30) days;


 


then, upon the occurrence of any such Event of Default
and at any time thereafter, Lender or its successors or assigns, may, in
addition to any other rights or remedies available to it pursuant to this
Agreement and the other Loan Documents, or under the Crossed Loan Documents, or
at law or in equity, take such action, without further notice or demand, as
Lender or its successors or assigns, deems advisable to protect and enforce its
rights against Borrower and in and to all or any portion of the Collateral and
in and to the Crossed Properties, and may enforce or avail itself of any or all
rights or remedies provided in the Loan Documents against Borrower and/or the
Collateral (including, without limitation, all rights or remedies available at
law or in equity), and any and all rights or remedies provided in the Crossed
Loan Documents against the Crossed Borrowers and/or the Crossed
Properties.  In addition to and without
limiting the foregoing, upon the occurrence of any Event of Default described
in any of Sections 7.1(e), (f), or (g), the unpaid principal amount of and
accrued interest and fees on the Loan and all other Indebtedness shall
automatically become immediately due and payable, without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or other
requirements of any kind, all of which are hereby expressly waived by
Borrower.  Upon and at any time after
the occurrence of any other Event of Default, at the option of Lender, which
may be exercised without notice or demand to anyone, all or any portion of the
Loan and other Indebtedness shall immediately become due and payable.


 


Section 7.2.            Remedies.


 


(a)           Upon
the occurrence of an Event of Default, all or any one or more of the rights,
powers, other remedies available to Lender against Borrower under this
Agreement or any of the other Loan Documents executed by or with respect to
Borrower, or at law or in equity may be exercised by Lender at any time and
from time to time, whether or not all or any portion of the Indebtedness shall
be declared due and payable, and whether or not Lender shall have commenced any
foreclosure proceeding or other action for the enforcement of its rights and
remedies under any of the Loan Documents with respect to all or any portion of
the Collateral, and under any of the Crossed Loan Documents with respect to all
or any portion of the Crossed


 


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Properties. 
Any such actions taken by Lender shall be cumulative and concurrent and
may be pursued independently, singly, successively, together or otherwise, at
such time and in such order as Lender may determine in its sole discretion, to
the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Lender permitted by law, equity or contract or
as set forth herein or in the other Loan Documents or in the Crossed Loan
Documents.


 


(b)           In
the event of the foreclosure or other action by Lender to enforce Lender’s
remedies in connection with all or any portion of the Collateral, Lender shall
apply all Net Proceeds received to repay the Indebtedness and Crossed
Indebtedness in accordance with Section 2.8,
the Indebtedness or Crossed Indebtedness (as selected by Lender in its sole
discretion) shall be reduced to the extent of such Net Proceeds and the
remaining portion of the Indebtedness and Crossed Indebtedness shall remain
outstanding and secured by the Loan Documents, it being understood and agreed
by Borrower that Borrower is liable for the repayment of all the Indebtedness; provided, however,
that the Loan shall be deemed to have been repaid only to the extent of the Net
Proceeds actually received by Lender with respect to the Collateral and applied
in reduction of the Indebtedness evidenced by the Note in accordance with the
provisions of this Agreement (rather than application to the Crossed
Indebtedness or other obligations other than the Loan), after payment by
Borrower of all Transaction Costs and costs of enforcement.


 


(c)           Upon
and during the continuation of an Event of Default, Lender shall have the
right, but not the obligation, with respect to any and all bankruptcy
proceedings that are now or hereafter commenced in connection with the
Mortgaged Property, to (i) vote to accept or reject any plans of
reorganization, (ii) vote in any election of a trustee, (iii) elect the
treatment of secured claims as specified in Section
1111(b) of the Bankruptcy Code, and (iv) make any other decisions
requested of holders of claims or interests that Borrower would have had the
right to do in such bankruptcy proceedings in the absence of an Event of
Default.


 


Section 7.3.            Remedies
Cumulative.  The rights,
powers and remedies of Lender under this Agreement shall be cumulative and not
exclusive of any other right, power or remedy which Lender may have against
Borrower pursuant to this Agreement or the other Loan Documents executed by or
with respect to Borrower, or existing at law or in equity or otherwise.  Lender’s rights, powers and remedies may be
pursued singly, concurrently or otherwise, at such time and in such order as
Lender may determine in Lender’s sole discretion.  No delay or omission to exercise any remedy, right or power
accruing upon an Event of Default shall impair any such remedy, right or power
or shall be construed as a waiver thereof, but any such remedy, right or power
may be exercised from time to time and as often as may be deemed
expedient.  A waiver of any Default or
Event of Default shall not be construed to be a waiver of any subsequent
Default or Event of Default or to impair any remedy, right or power consequent
thereon.  Notwithstanding any other
provision of this Agreement, Lender reserves the right to seek a deficiency
judgment or preserve a deficiency claim, in connection with the foreclosure of
any Mortgage on the Mortgaged Property, to the extent necessary to foreclose on
other parts of the Collateral.


 


Section 7.4.            Intentionally
Omitted.


 


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Section 7.5.            Curative Advances.  If any Event of Default occurs and is not
cured by Borrower after notice from Lender, then Lender may expend such sums as
either shall reasonably deem appropriate to cure or attempt to cure such Event
of Default.  Borrower shall immediately
repay all such sums so advanced, which sums shall immediately become part of
the Indebtedness, bear interest at the Default Rate from the date advanced
until the date repaid, and be secured by all Collateral.


 


ARTICLE VIII.

SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,

WARRANTIES AND COVENANTS


 


Section 8.1.            Applicable to
Borrower.  Borrower hereby
acknowledges that, as a condition of Lender’s agreements and performance of its
obligations hereunder, Lender is relying on the status of Borrower as a legal
entity separate and apart from any Affiliate or other entity and has required
that Borrower maintain such status, and Lender hereby acknowledges such
reliance and requirement.  Accordingly,
Borrower hereby represents, warrants and covenants as of the Closing Date and
until such time as the Loan is paid in full, that absent express advance
written waiver from Lender, which may be withheld the Lender’s sole discretion,
Borrower:


 


(a)           was
and will be organized solely for purpose of owning and operating the Mortgaged
Property;


 


(b)           has
not owned, does not own and will not own any assets other than the Mortgaged
Property (including incidental personal property necessary for the operation
thereof and proceeds therefrom);


 


(c)           was
not engaged, is not engaged and will not engage in any business, directly or
indirectly, other than the ownership, management and operation of the Mortgaged
Property;


 


(d)           has
not entered into and will not enter into any contract or agreement with any
partner, member, shareholder, trustee, beneficiary, principal, joint venturer
or Affiliate of Borrower except in the ordinary course of its business pursuant
to written agreements upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arms-length basis
with third parties other than such Affiliate;


 


(e)           has
not incurred and will not incur any debt, secured or unsecured, direct or
contingent (including guaranteeing any obligation), other than (i) the Loan and
the Crossed Loans, and (ii) trade payables incurred in the ordinary course of
business with trade creditors in connection with owning, operating and
maintaining the Mortgaged Property, in such amounts as are normal and
reasonable under the circumstances, provided such debt is not evidenced by a
promissory note or other security instrument and is not at any time in an
aggregate amount in excess of two percent (2%) of the Principal Indebtedness,
and further provided that all such trade debts are paid within sixty (60) days
after the same are incurred (excluding therefrom any equipment financing paid
within sixty (60) days after the same are incurred) and trade payables


 


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being disputed or contested in good faith by the
Borrower and in the same manner and with the same deposits as Lien Claims set
forth in Section 5.1(b)(ii) of this Agreement;)


 


(f)            has
not made and will not make any loan or advances to any Person (including any of
its Affiliates), or pledge its assets for the benefit of any other Person
(other than to Lender for the indirect benefit of the Crossed Borrowers to
secure the Crossed Loans), or seek or obtain credit or incur any obligation to
any third party based upon the assets of any other Person, or induce any third
party to rely on the creditworthiness of any other Person;


 


(g)           has
remained and as of the Closing Date reasonably expects to remain, solvent, and
has maintained, and as of the Closing Date reasonably expects to maintain
adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations;


 


(h)           has
not acquired and will not acquire obligations or securities of any Person;


 


(i)            has
not failed and will not fail to correct any known misunderstanding or
misrepresentation regarding its separate identity;


 


(j)            has
done or caused to be done and will do all things necessary to preserve its
existence;


 


(k)           shall
continuously maintain its existence and good standing and be qualified to do
business in all states necessary to carry on its business, including the state
in which the Mortgaged Property is located;


 


(l)            has
conducted and operated and will conduct and operate its business solely in its
own name, with all oral and written communications from Borrower, including,
without limitation, correspondence, invoices, purchase orders, billing
statements, applications and business forms, made solely in the name of
Borrower;


 


(m)          has
accurately maintained and will continue to accurately maintain books, records,
bank accounts, accounting records, financial statements and other entity
documents separate from those of its partners, members, shareholders, trustees,
beneficiaries, principals, Affiliates, and any other Person, with such
accounting records and financial statements having been prepared and kept in
accordance with reasonable accounting practices applied on a consistent basis,
and such financial statements of Borrower shall be prepared in a manner that
indicates (through appropriate footnotes if necessary) the existence of
Borrower and its assets and liabilities separate and apart from any other
Person; moreover, Borrower shall indicate in its financial statements that the
assets of Borrower are not available to satisfy the claims of creditors of any
Affiliate of Borrower and that the assets of any Affiliate of Borrower are not
available to satisfy the claims of creditors of Borrower and, except with
appropriate designation as set forth above, Borrower shall not authorize its
assets or liabilities to be listed on the financial statement of any other
Person;


 


(n)           has
been and will be, and at all times has held and will hold itself out to the
public as, a legal entity separate and distinct from any other Person
(including any of its


 


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partners, members, shareholders, trustees,
beneficiaries, principals and Affiliates, and any Affiliates of any of the
same), and not as a department or division of any Person;


 


(o)           has
and will file such tax returns with respect to itself as may be required under
applicable law and has prepared and will prepare separate tax returns and
financial statements, or if part of a consolidated group, is shown as a
separate member of such group;


 


(p)           has
paid and shall pay its own liabilities, indebtedness, and obligations of any
kind, as the same shall become due, from its own separate assets, rather than
from those of other Persons, and Borrower shall not consent to any Person
operating the Mortgaged Property to incur expenses as agent or on behalf of
Borrower, unless such Person agrees, prior to incurring such expense, to
clearly indicate that such expenses are the sole responsibility of, and any
payment will come from, Borrower;


 


(q)           has
not and will not enter into any transaction of merger or consolidation, or
acquire by purchase or otherwise all or substantially all of the business or
assets of, or any stock or beneficial ownership of, any Person;


 


(r)            has
not commingled and will not commingle or permit to be commingled its funds or
other assets with those of any other Person; and has held and will hold title
to all of its real and personal property in its own name and not in the name of
any other Person;


 


(s)           has
maintained and will maintain its assets in such a manner that it is not costly
or difficult to segregate, ascertain or identify its individual assets from
those of any other Person;


 


(t)            has
not, does not and will not hold itself out to be responsible for the debts or
obligations of any other Person (other than the Crossed Loans) and, except for
the Loan Documents to which other Persons are party, shall not consent to any
other Person holding itself out as being responsible for the debts or
obligations of Borrower (other than the Crossed Borrowers pursuant to the
Crossed Loan Documents);


 


(u)           has
not and will not assume, guarantee or otherwise become liable on or in
connection with any obligation of any other Person (other than the Crossed
Borrowers under the Crossed Loans) and, except for the Loan Documents to which
other Persons are party, shall not consent to any other Person guaranteeing,
assuming or otherwise becoming liable for any obligation of Borrower(other than
the Crossed Borrowers pursuant to the Crossed Loan Documents);


 


(v)           except
for funds deposited into the Local Collection Account, the Collection Account
or the Reserve Accounts in accordance with the Loan Documents, has not and
shall not hold title to its assets other than in its name;


 


(w)          complies
and shall at all times hereafter comply with all of the assumptions, statements,
certifications, representations, warranties and covenants regarding or made by
it contained in or appended to the nonconsolidation opinion delivered pursuant
hereto;


 


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(x)            has
paid and will pay its own liabilities and expenses, out of its own funds and
shall not consent to any other Person paying Borrower’s obligations except to
the extent that timely reimbursement is made for the same;


 


(y)           has
held and will hold regular meetings, as appropriate to conduct its business and
has observed at all times and will observe all limited liability company
formalities and record keeping;


 


(z)            has
allocated and will allocate to Borrower reasonably and on the basis of fair
market value determined on an arms-length basis all general overhead and
administrative expenses, including all costs associated with common employees
and shared office space, any such allocation shall be specifically and
reasonably documented and substantiated, any such allocation of expenses to
Borrower shall be paid solely by Borrower from Borrower’s own funds, and
Borrower shall at all times use separate stationary, letterhead, invoices and
checks;


 


(aa)         has
not and will not identify its members or partners, Independent Manager (as
defined below) or any other member or partner of any Affiliate of Borrower, or
any other Person, as a division or part of it;


 


(bb)         has
paid and will pay the salaries of its own employees and has maintained and will
maintain a sufficient number of employees in light of its contemplated business
operations;


 


(cc)         has
maintained, currently maintains, and will continue to maintain, its own cash,
cash positions and bank accounts separate from any other Person;


 


(dd)         shall
not (i) liquidate or dissolve, in whole or in part; (ii) consolidate, merge or
enter into any form of consolidation with or into any other Person, nor convey,
transfer or lease its assets substantially as an entirety to any Person nor
permit any Person to consolidate, merge or enter into any form of consolidation
with or into itself, nor convey, transfer or lease its assets substantially as
an entirety to any Person; (iii) engage in any business other than the
ownership and operation of the Mortgaged Property; or (iv) amend any provisions
of its organizational documents containing provisions similar to those
contained in this Article VIII;


 


(ee)         is
a limited liability company duly formed and existing under the laws of the
State of Delaware with one (1) equity member (the “Single Member”) in
addition to the Independent Manager, whose limited liability company agreement
(the “Borrower Organizational Documents”) contains each of the
representations, covenants and warranties set forth in this Article VIII
and requires Borrower to at all times cause there to be at least one (1) duly
appointed independent director or independent manager, as applicable, who is a
natural person and also a non-economic member of Borrower (each, an “Independent
Director/Manager”) whose affirmative vote will be required in order for a
voluntary filing for protection under the Bankruptcy Code or similar action by
Borrower and who is not at the time of such individual’s initial appointment as
Independent Director/Manager, shall not be during such individual’s tenure as
Independent Director/Manager, and may not have been at any time during the
preceding five years, (i) a shareholder, member or partner of, or an officer,
manager, director, except in his or her capacity as Independent
Director/Manager of Borrower, paid


 


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consultant or employee of, customer of or supplier to
or a member of the immediate family of Borrower (except in his or her capacity
as Independent Director/Manager of Borrower) or any of its shareholders,
members, partners, subsidiaries or affiliates or (ii) any person or other
entity controlling or under common control with any such shareholder, member,
partner, officer, manager, director, employee, supplier or customer or any
member of the immediate family of any of them; provided, however,
that the foregoing limitations on the use of persons who are Affiliates of
Borrower as Independent Director/Manager shall not apply to Borrower’s use of
natural persons employed by CT Corporation or any reputable, national service similar
to CT Corporation and reasonably approved by Lender to fill the position of
Independent Director/ Manager required hereunder, notwithstanding that such
persons may also act as independent directors of such Affiliates of Borrower,
so long as such Independent Director/Manager does not derive more than 5% of
his/her annual income from serving as director/manager of Affiliates of
Borrower.  As used herein, the term “control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a person or entity, whether
through ownership of voting securities, by contract or otherwise;


 


(ff)           has
complied and will comply with the separateness provisions of the Organizational
Documents since such Organizational Documents were executed and delivered, and
with the laws of the state of its formation relating to limited liability
companies;


 


(gg)         with
respect to any entity comprising the Borrower that is a limited liability
company, the Organizational Documents provide and shall at all times continue
to provide that upon the occurrence of any event that causes the Single Member
to cease to be a member of Borrower, the Independent Director/Manager shall,
without action of any person and simultaneously with the Single Member ceasing
to be a member of Borrower, automatically continue as a member of such Borrower
and shall continue Borrower without dissolution;


 


(hh)         with
respect to any entity comprising the Borrower that is a limited liability
company, Borrower shall cause reputable Delaware counsel acceptable to Lender
(the “Delaware Law Firm”) to deliver to
Lender an opinion letter reasonably satisfactory to Lender, whereby the
Delaware Law Firm opines (which opinion may be subject to standard assumptions,
qualifications, limitations and exceptions acceptable to Lender), among other
requirements of Lender, that: (1) the unanimous consent of the Single Member
and the Independent Manager is required in order for the applicable Borrower to
file a voluntary bankruptcy petition; (2) the provision in Organizational
Documents that requires unanimous consent as a condition to filing a voluntary
bankruptcy petition is enforceable against the Single Member; (3) the
bankruptcy, dissolution, liquidation or death of the Single Member will not
cause the applicable Borrower to be dissolved; (4) no creditor of the Single
Member shall have the right to obtain possession of, or otherwise exercise
legal or equitable remedies with respect to, the applicable Borrower’s
property; and (5) Delaware law, not federal law, governs the determination of
what persons or entities have the authority to file a voluntary bankruptcy
petition on behalf of the applicable Borrower;


 


(ii)           the
Organizational Documents provide and shall at all times continue to provide
that Borrower shall not cause, permit, or empower the Single Member, manager,
or any other person to consolidate or merge Borrower into any other entity, or,
without the affirmative vote and express written authorization of all members
or partners of Borrower and the


 


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Independent Director/Manager, to institute proceedings
to have Borrower adjudicated bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against Borrower or file a
petition seeking or consent to, reorganization or relief with respect to
Borrower under any applicable federal or state law relating to bankruptcy, or
consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of Borrower or a substantial part of Borrower’s
property, or make any assignment for the benefit of creditors of Borrower, or
admit in writing Borrower’s inability to pay its debts generally as they become
due, or take action in furtherance of any such action; and


 


(jj)           the
Borrower Organizational Documents provide and shall at all times continue to
provide (i) that Borrower shall at all times maintain an arms-length
relationship with any Affiliates of Borrower, (ii) that Borrower shall at all
times maintain independent management over its daily business affairs, free
from any control exercised by any Affiliate of Borrower, and (iii) that to the
extent that control of Borrower is exercised by any manager, and the same individual
acts as manager or similar control person with respect to any Affiliate of
Borrower, such individual will act in accordance with the separateness
requirements of the Loan Documents and Borrower Organizational Documents,
including, without limitation (A) an express requirement under the Borrower
Organizational Documents that the manager of Borrower make all decisions
regarding the business of Borrower independent of, and not dictated by, any
Affiliate of the Borrower, and (B) the provisions of the Loan Documents and the
Borrower Organizational Documents relating to transactions with Affiliates of
Borrower and conflicts of interest.


 


ARTICLE IX.

MISCELLANEOUS


 


Section 9.1.            Survival.  This Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, the making the Loan hereunder and the execution and delivery by
Borrower to Lender of the Loan Documents, and shall continue in full force and
effect so long as any portion of the Indebtedness is outstanding and
unpaid.  Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party. 
All covenants, promises and agreements in this Agreement contained, by
or on behalf of Borrower, shall inure to the benefit of the respective
successors and assigns of Lender. 
Nothing in this Agreement or in any other Loan Document, express or
implied, shall give to any Person other than the parties and the holder of the
Note and the other Loan Documents, and their legal representatives, successors
and assigns, any benefit or any legal or equitable right, remedy or claim
hereunder.


 


Section 9.2.            Lender’s Discretion.  Whenever pursuant to this Agreement, Lender
exercises any right given to it to approve or disapprove, or any arrangement or
term is to be satisfactory to Lender, the decision of Lender to approve or
disapprove or to decide whether arrangements or terms are satisfactory or not
satisfactory shall (except as is otherwise specifically herein provided) be in
the sole discretion of Lender and shall be final and conclusive.


 


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Section 9.3.            Governing Law.


 


This Agreement was negotiated in New York and made by
Lender and accepted by Borrower in the State of New York, and the proceeds of
the Note delivered pursuant hereto were disbursed from New York, which State
the parties agree has a substantial relationship to the parties and to the
underlying transaction embodied hereby, and in all respects (including, without
limitation, matters of construction, validity, performance, and maximum
permissible rates of interest), this Agreement and the obligations arising hereunder
shall be governed by, and construed in accordance with, the laws of the State
of New York applicable to contracts made and performed in such State and any
applicable law of the United States of America, except that at all times the
provisions for the creation, perfection and enforcement of the liens and
security interests created pursuant to each Mortgage and Assignment of Rents
and Leases shall be governed by the laws of each State where the related
Mortgaged Property is located, except that the security interests in Account
Collateral shall be governed by the laws of the State of New York or the State
where the Account Collateral is held, at the option of Lender..


 


(a)           Borrower
hereby consents to the jurisdiction of any federal court or state court in New
York, New York or within the county and state in which any Mortgaged Property
is located and irrevocably agrees that, subject to Lender’s election, any legal
suit, action or proceeding against Lender or Borrower arising out of or
relating to this Agreement or the other Loan Documents may be instituted and
litigated in such courts.  Borrower
hereby (i) irrevocably waives, to the fullest extent permitted by applicable
law, any objection which it may now or hereafter have to the laying of venue of
any such suit, action or proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum, and (ii) irrevocably submits to the jurisdiction of any such court in
any such suit, action or proceeding. 
Borrower does hereby designate and appoint Corporation Service Company,
as its authorized agent to accept and acknowledge on its behalf service of any
and all process which may be served in any such suit, action or proceeding in
any federal or state court in New York, New York, and agrees that service of
process upon said agent at said address (or at such other office in New York,
New York as may be designated by Borrower from time to time in accordance with
the terms hereof) with a copy to Borrower at its principal executive offices,
and written notice of said service of Borrower mailed or delivered to Borrower
in the manner provided herein shall be deemed in every respect effective
service of process upon Borrower, in any such suit, action or proceeding in the
State of New York.  Borrower (i) shall
give prompt notice to Lender of any change in address of its authorized agent
hereunder, (ii) may at any time and from time to time designate a substitute authorized
agent with an office in New York, New York (which office shall be designated as
the address for service of process), and (iii) shall promptly designate such a
substitute if its authorized agent ceases to have an office in New York, New
York or is dissolved without leaving a successor.


 


Section 9.4.            Modification,
Waiver in Writing.  No
modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement or any other Loan Document, or consent or waiver
referred to in any Loan Document or consent to any departure by Borrower
therefrom, shall in any event be effective unless the same shall be in a
writing signed by the party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the specific instance, and for the
purpose, for which given.  Except as
otherwise expressly provided herein, no notice to or demand on Borrower shall
entitle Borrower to any other or future notice or demand in the same, similar
or other circumstances.


 


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Section 9.5.            Delay Not a Waiver.  Neither any failure nor any delay on the
part of Lender in insisting upon strict performance of any term, condition,
covenant or agreement, or exercising any right, power, remedy or privilege
hereunder, or under any other Loan Document, or any other instrument given as
security therefor, shall operate as or constitute a waiver thereof, nor shall a
single or partial exercise thereof preclude any other future exercise, or the
exercise of any other right, power, remedy or privilege.  In particular, and not by way of limitation,
by accepting payment after the due date of any amount payable under this
Agreement, the Note or any other Loan Document, Lender shall not be deemed to have
waived any right either to require prompt payment when due of all other amounts
due under this Agreement, the Note or the other Loan Documents, or to declare a
default for failure to effect prompt payment of any such other amount.


 


Section 9.6.            Notices.  All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document shall be given
in writing and shall be effective for all purposes if delivered or sent by: (a)
hand delivery, (b) certified or registered United States mail, postage prepaid,
(c) nationally recognized overnight delivery service, (d) by facsimile
transmission, addressed if to Lender or to Borrower at its applicable address
set forth on Schedule 5 hereto, or at such other address and Person as
shall be designated from time to time by any party hereto, as the case may be,
in a written notice to the other parties hereto in the manner provided for in
this Section 8.6, or (e) other than with
respect to an amendment or modification, an electronic medium.  A notice shall be deemed to have been given:
in the case of hand delivery, at the time of delivery; in the case of
registered or certified mail, when delivered or three Business Days after
mailing; in the case of overnight delivery and facsimile transmission, on the
Business Day after the same was sent; or in the case of electronic medium, when
confirmed by e-mail.  A party receiving
a notice which does not comply with the technical requirements for notice under
this Section 9.6 may elect to waive any
deficiencies and treat the notice as having been properly given.  Delivery by telecopier of an executed
counterpart of any amendment or waiver of any provision of this Agreement or
the Notes or of any Exhibit hereto to be executed and delivered hereunder shall
be effective as delivery of an original executed counterpart thereof.


 


Section 9.7.            TRIAL BY JURY.  BORROWER, TO THE FULLEST EXTENT THAT IT MAY
LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING,
WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT
TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.


 


Section 9.8.            Headings.  The Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.


 


Section 9.9.            Assignment.


 


(a)           Borrower
may not sell, assign or transfer any interest in the Loan Documents, or any
portion of the foregoing (including, without limitation, Borrower’s rights,
title, interests, remedies, powers and duties hereunder and thereunder) without
Lender’s prior written consent.  Lender
shall have the right to assign or participate this Agreement and/or its


 


116

















 


interest in any of the other Loan Documents and the
obligations hereunder to any Person.  In
the event of an assignment by Lender, (a) the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as it
would have if it were an original “Lender” hereunder; (b) the assignee shall be
deemed for all purposes to be a “Lender” hereunder; and (c) upon any such
substitution of Lender, a replacement or addition “Lender signature page” shall
be executed by the new Lender and attached to this Agreement and thereupon
become a part of this Agreement.  After
the effectiveness of any assignment, the new Lender shall provide notice to
Borrower of the identity, address and other pertinent information pertaining to
the new Lender.  Notwithstanding
anything in this Agreement to the contrary, after an assignment by Lender, the
“Lender” (prior to such assignment) shall continue to have the benefits of any
rights or indemnifications and shall continue to have the obligations contained
herein which Lender had during the period such party was a “Lender” hereunder.  Borrower agrees that each participant shall
be entitled to the benefits of Section 2.10 with respect to its participation
in this Agreement or any other Loan Document from time to time as if such
participant were a Lender; provided that, in the case of Section 2.10, such
participant shall have complied with the requirements of said Section, and
provided, further, that no participant shall be entitled to receive any greater
amount pursuant to Section 2.10 than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred
by such transferor Lender to such participant had no such transfer occurred.


 


(b)           Lender
may from time to time elect to enter into a servicing agreement with a
servicer, pursuant to which the servicer shall be appointed to service and
administer the Loan and the Account Collateral in accordance with the terms
hereof and to exercise any and all other rights of Lender with respect to the
Loan as set forth in such servicing agreement. 
Lender shall promptly notify Borrower if Lender shall elect to appoint
or change the servicer, and all notices and other communications from Borrower
to Lender shall be delivered to the servicer with a copy concurrently delivered
to the Lender, and any notice, direction or other communication from the
servicer to Borrower shall have the same force and effect as a notice,
direction or communication from Lender. 
The servicer shall be entitled to be reimbursed for any cost, expense or
liability which is incurred by the servicer pursuant to such servicing and
administrative duties and which would otherwise be reimbursable to Lender under
this Agreement or any other Loan Document in the same manner and to the same
extent as if Lender incurred such cost, expense or liability in the first
place.  The parties hereto acknowledge
and agree that the servicer shall be a third party beneficiary to this
Agreement and the other Loan Documents.


 


Section 9.10.          Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.


 


Section 9.11.          Preferences.  Lender shall have no obligation to marshal
any assets in favor of Borrower or any other party or against or in payment of
any or all of the obligations of Borrower pursuant to this Agreement, the Note
or any other Loan Document.  Lender
shall have the continuing and exclusive right to apply or reverse and reapply
any and all payments by Borrower to any portion of the obligations of Borrower
hereunder, provided that such application


 


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or reapplication is performed by Lender in accordance
with the terms of this Agreement or any other applicable Loan Document.  To the extent Borrower makes a payment or
payments to Lender for Borrower’s benefit, which payment or proceeds or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party under any bankruptcy law, state or federal law, common law or
equitable cause, then, to the extent of such payment or proceeds received, the
obligations hereunder or part thereof intended to be satisfied shall be revived
and continue in full force and effect, as if such payment or proceeds had not
been received by Lender.


 


Section 9.12.          Waiver of Notice.  Borrower shall not be entitled to any
notices of any nature whatsoever from Lender except with respect to matters for
which this Agreement or another Loan Document specifically and expressly
provides for the giving of notice by Lender to Borrower and except with respect
to matters for which Borrower is not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice.  Borrower hereby expressly waives the right
to receive any notice from Lender with respect to any matter for which this
Agreement or the other Loan Documents does not specifically and expressly
provide for the giving of notice by Lender to Borrower.


 


Section 9.13.          Failure to Consent.  If Borrower shall seek the approval by or
consent of Lender hereunder or under the Note, or any of the other Loan
Documents, and Lender shall fail or refuse to give such consent or approval,
then Borrower shall not be entitled to any damages for any withholding or delay
of such approval or consent by Lender, it being intended that Borrower’s sole
remedy shall be to bring an action for an injunction or specific performance.


 


Section 9.14.          Schedules
Incorporated.  The information
set forth on the cover, heading and recitals hereof, and the Schedules attached
hereto, are hereby incorporated herein as a part of this Agreement with the
same effect as if set forth in the body hereof.


 


Section 9.15.          Offsets,
Counterclaims and Defenses. 
Any assignee of any of Lender’s interest in and to this Agreement and
the other Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to this Agreement and the other
Loan Documents which Borrower may otherwise have against any assignor or this
Agreement and the other Loan Documents. 
No such unrelated counterclaim or defense shall be interposed or
asserted by Borrower in any action or proceeding brought by any such assignee
upon this Agreement or upon any other Loan Document.  Any such right to interpose or assert any such unrelated offset,
counterclaim or defense in any such action or proceeding is hereby expressly
waived by Borrower.


 


Section 9.16.          No Joint Venture or
Partnership.  Borrower and
Lender intend that the relationship created hereunder be solely that of
borrower and lender.  Nothing herein is
intended to create a joint venture, partnership, tenancy-in-common, or joint
tenancy relationship between Borrower and Lender nor to grant Lender any
interest in the Collateral other than that of secured party, mortgagee or
lender.


 


Section 9.17.          Waiver of
Marshalling of Assets Defense. 
To the fullest extent Borrower may legally do so, Borrower waives all
rights to a marshalling of the assets of


 


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Borrower, and others with interests in Borrower, and
of the Collateral, or to a sale in inverse order of alienation in the event of
foreclosure of the interests hereby created, and agrees not to assert any right
under any laws pertaining to the marshalling of assets, the sale in inverse
order of alienation, homestead exemption, the administration of estates of
decedents, or any other matters whatsoever to defeat, reduce or affect the
right of Lender under the Loan Documents to a sale of any Collateral for the
collection of the Indebtedness without any prior or different resort for
collection, or the right of Lender to the payment of the Indebtedness out of
the Net Proceeds of the Collateral in preference to every other claimant
whatsoever.


 


Section 9.18.          Waiver of
Counterclaim.  To the extent
permitted by applicable law, Borrower hereby waives the right to assert a
counterclaim, other than compulsory counterclaim, in any action or proceeding
brought against it by Lender or its agents.


 


Section 9.19.          Conflict;
Construction of Documents. 
In the event of any conflict between the provisions of this Agreement
and the provisions of any of the other Loan Documents, the provisions of this
Agreement shall prevail.  The parties
hereto acknowledge that they were represented by counsel in connection with the
negotiation and drafting of the Loan Documents and that the Loan Documents
shall not be subject to the principle of construing their meaning against the
party that drafted same.


 


Section 9.20.          Brokers and
Financial Advisors.  Borrower
hereby represents that it has dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement. 
Borrower hereby agrees to indemnify and hold Lender harmless from and
against any and all claims, liabilities, costs and expenses of any kind in any
way relating to or arising from a claim by any Person that such Person acted on
behalf of Borrower in connection with the transactions contemplated
herein.  The provisions of this Section 9.20 shall survive the expiration and
termination of this Agreement and the repayment of the Indebtedness.


 


Section 9.21.          Counterparts.  This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.


 


Section 9.22.          Estoppel
Certificates.  Borrower and
Lender hereby agree at any time and from time to time upon not less than
fifteen (15) days prior written notice by Borrower or Lender to execute,
acknowledge and deliver to the party specified in such notice, a statement, in
writing, certifying that this Agreement is unmodified and in full force and
effect (or if there have been modifications, that the same, as modified, is in
full force and effect and stating the modifications hereto), and stating
whether or not, to the knowledge of such certifying party, any Default or Event
of Default has occurred and is then continuing, and, if so, specifying each
such Default or Event of Default; provided,
however, that it shall be a condition
precedent to Lender’s obligation to deliver the statement pursuant to this Section 8.22, that Lender shall have received,
together with Borrower’s request for such statement, an Officer’s Certificate
stating that, to the knowledge of Borrower, no Default or Event of Default
exists as of the date of such certificate (or specifying such Default or Event
of Default).


 


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Section 9.23.          Payment of Expenses.  Borrower shall pay all Transaction Costs,
(excluding any Tax Liabilities which are not payable by the Borrower pursuant
to Section 2.10), which shall include, without limitation, (a) reasonable
out-of-pocket costs and expenses of Lender in connection with (i) the
negotiation, preparation, execution and delivery of the Loan Documents and the
documents and instruments referred to therein; (ii) the creation, perfection or
protection of Lender’s Liens in the Collateral (including, without limitation,
fees and expenses for title and lien searches or amended or replacement
Mortgages, UCC financing statements or Collateral Security Instruments, title
insurance premiums and filing and recording fees, third party due diligence
expenses for the Mortgaged Property plus travel expenses, accounting firm fees,
costs of the Appraisals, Environmental Reports (and an environmental
consultant), and the Property Condition Assessments and costs and fees incurred
in connection with arranging, setting up, servicing and maintaining the Account
Collateral); (iii) the administration of the Loan Documents and the Loan and
response to any requests for Lender consent or approval of any matter; (iv) the
negotiation, preparation, execution and delivery of any amendment, waiver,
restructuring or consent relating to any of the Loan Documents, and (v) the
preservation of rights under and enforcement of the Loan Documents and the
documents and instruments referred to therein, including any communications or
discussions relating to any action that Borrower shall from time to time
request Lender to take, as well as any restructuring or rescheduling of the
Indebtedness, (b) the reasonable fees, expenses and other charges of counsel to
Lender or its servicer in connection with all of the foregoing, and (c)
Lender’s reasonable out-of-pocket travel expenses in connection with site
visits to the Mortgaged Property; provided, that so long as an Event of
Default has not occurred and is not continuing, the Borrower shall not be
obligated to pay for Lender’s travel expenses in connection with more than one
site visit to each individual Mortgaged Property during any twelve consecutive
month period and Lender shall use reasonable efforts to minimize the
Transaction Costs paid by Borrower in connection with such site visits.


 


Section 9.24.          Non-Recourse.  Anything contained herein, in the Note or in
any other Loan Document to the contrary notwithstanding, but subject in all
respect to provisos (A) through (E) below, no recourse shall be had for the
payment of the principal or interest on the Loan or for any other Indebtedness,
obligation or liability hereunder or under any other Loan Document or for any
claim based hereon or thereon or otherwise in respect hereof or thereof against
(i) any Affiliate of Borrower (other than Borrower or any Crossed Borrower),
(ii) any Person owning, directly or indirectly, any legal or beneficial
interest in Borrower or any Affiliate of Borrower (other than Borrower or any
Crossed Borrower) or (iii) any partner, member, principal, officer, controlling
person, beneficiary, trustee, advisor, shareholder, employee, agent, Affiliate
or director of any Persons described in clauses (i) through (ii) above (other
than Borrower or any Crossed Borrower), and it is understood that neither the
Note nor any other Indebtedness, obligation or liability under or with respect
to this Agreement and any other Loan Document may be enforced against any
Person described in clauses (i) through (iii) above (other than Borrower or Crossed
Borrower); provided, however,
that the foregoing provisions of this paragraph shall not:


 


(A)          prevent recourse to
Borrower, Crossed Borrower, the assets of Borrower, Crossed Borrower, the
Mortgaged Property, the Crossed Property or any other instrument or document
which is pledged by Borrower or Crossed


 


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Borrower to Lender pursuant to the Loan Documents or
Crossed Loan Documents, including all Collateral;


 


(B)           have any applicability
whatsoever to or limit the liability of the parties under the Guaranty of
Non-Recourse Obligations or any Crossed Guaranty; or


 


(C)           constitute a waiver,
release or discharge of any indebtedness or obligation evidenced by the Note or
secured by the Loan Documents (or evidenced and/or secured by any Crossed Loan
Documents), and the same shall continue until paid or discharged in full;


 


(D)          prevent recourse to
Borrower, any Crossed Borrowers and Guarantor, jointly and severally, and their
respective assets for repayment of the Indebtedness, and the Indebtedness shall
be fully recourse not only to Borrower but also to any Crossed Borrowers and
Guarantor, in the event:


 


(1)           Borrower or any
Affiliate contests or in any way interferes with, directly or indirectly
(collectively, a “Contest”), any
foreclosure action or sale commenced by Lender or with any other enforcement of
Lender’s rights, powers or remedies under any of the Loan Documents or under
any document evidencing, securing or otherwise relating to any of the
Collateral (whether by making any motion, bringing any counterclaim, claiming
any defense, seeking any injunction or other restraint, commencing any action
seeking to consolidate any such foreclosure or other enforcement with any other
action, or otherwise) (except this clause (1) shall not apply if Borrower or
such Affiliate successfully asserts a Contest and obtains a favorable court
order for the Borrower as to same);


 


(2)           any Mortgaged Property
becomes an asset in a voluntary bankruptcy or insolvency proceeding or any
petition for bankruptcy, reorganization or arrangement pursuant to federal
bankruptcy law, or any similar federal or state law, shall be filed (x) by
Borrower or (y) against Borrower with the consent or acquiescence of Borrower
or the Guarantor or their respective Affiliates;


 


(3)           of any Transfer in
violation of the terms of the Loan Documents;


 


(4)           Borrower or the
Guarantor makes an assignment for the benefit of creditors or admits, in
writing or in any legal proceeding, its insolvency or inability to pay its
debts as they become due; or


 


(5)           of any breach by
Borrower, any Crossed Borrower or Guarantor under the Side Agreement or any
Cross Side Agreement (excepting any Excluded Side Agreement(s) in the event
Lender elects to


 


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terminate
cross-collateralization with respect to the related Excluded Loan(s) pursuant
to Section 2.11(g) hereof); or


 


(E)           prevent recourse to
Borrower, any Crossed Borrower and Guarantor, jointly and severally, and their
respective assets, and Borrower, any Crossed Borrowers and Guarantor shall be
fully and personally liable, for any loss, costs, liability, damage or expense
(including, without limitation, attorneys’ fees and disbursements) suffered or
incurred by Lender or any Indemnified Party related to or arising from any of
the following acts committed by or on behalf of Borrower, any Crossed
Borrowers, Guarantor or any of their respective Affiliates:


 


(1)           any fraud,
misappropriation or misapplication of funds (including Loss Proceeds or Rents)
in contravention of the Loan Documents, or intentional misrepresentation
contained in any Loan Documents or report furnished pursuant to any Loan
Document;


 


(2)           additional financing
obtained by Borrower (whether secured or unsecured) in violation of the terms
of the Loan Documents;


 


(3)           actual material
physical waste to the Mortgaged Property or material damage to the Mortgaged
Property resulting from gross negligence or willful misconduct;


 


(4)           of any breach of
Article VIII hereof;


 


(5)           of any breach of any
representation, warranty or covenant in this Agreement or the Environmental
Indemnity Agreement, concerning Environmental Laws and Hazardous Substances;


 


(6)           any security deposits
received by Borrower or Manager from tenants not being properly applied,
returned to tenants when due or delivered to Lender, a receiver or a purchaser
of the Mortgaged Property in the event of a foreclosure sale upon such Person
taking possession of the Mortgaged Property;


 


(7)           any Legal Requirement
mandating the forfeiture by Borrower of the Collateral or any portion thereof
because of the conduct or purported conduct of criminal activity by Borrower or
any Affiliate in connection therewith;


 


(8)           all costs and expenses,
including reasonable attorneys’ fees and expenses, incurred in enforcing any
obligation or liability or in collecting any amount due under this Section
9.24(D) or this Section 9.24(E), the Environmental Indemnity and the
Guaranty of Non-Recourse Obligations, which, as to Borrower, is a recourse
obligation of Borrower as described in this Section 9.24(D) or this Section
9.24(E), the Environmental Indemnity and the Guaranty of Non-Recourse
Obligations, or, as to Guarantor, is a recourse


 


122

















 


obligation of Guarantor
under the Guaranty of Non-Recourse Obligations or the Environmental Indemnity;


 


(9)           the failure to pay
Impositions assessed against the Mortgaged Property to the extent there was
sufficient funds available to pay and Lender allows Borrower to apply the same,
or the failure to maintain insurance as required under the Loan Documents, or
the failure to pay any deductible amount in respect of any insurance maintained
in respect of the Mortgaged Property, or the failure to pay and discharge any
mechanic’s or materialman’s Liens against the Mortgaged Property to the extent
there was sufficient funds available to pay and discharge and Lender allows
Borrower to apply the same; or


 


(10)         any Rents or Proceeds
received or collected by Borrower, any Affiliate of Borrower or Manager and not
deposited into the Local Collection Account or the Collection Account in
accordance with Section 2.12.


 


Section 9.25.          Joint and Several
Liability.  All
representations, warranties, covenants (both affirmative and negative) and all
other obligations hereunder and under the Loan Documents shall be the joint and
several obligation of each person or entity comprising Borrower and any default
hereunder or under the Loan Documents by any such person or entity shall be
deemed a default by all such entities and Borrower.  The representations, covenants and warranties contained herein
and in the Loan Documents shall be read to apply to each of the individual persons
and entities comprising Borrower when the context so requires, but a breach of
any such representation, covenant or warranty shall be deemed a breach by all
such persons and entities and Borrower, entitling Lender to exercise all of its
rights and remedies hereunder and under applicable law.


 


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IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their duly authorized representatives,
all as of the day and year first above written.


 


	 
	
   

  	
  LENDER:

  	 

	 
	
   

  	
   

  	
   

  	 

	 
	
   

  	
  MERRILL LYNCH MORTGAGE LENDING,

  INC., a Delaware corporation

  	 

	 
	
   

  	
   

  	 

	 
	
   

  	
   

  	 

	 
	
   

  	
  By:

  	
  /s/ George H. Kok

  	 

	 
	
   

  	
   

  	
  Name:

  	
  George H. Kok

  	 

	 
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  	 

	 
	
   

  	
   

  	 

	 
	
   

  	
   

  	 

	 
	
   

  	
  BORROWER:

  	 

	 
	
   

  	
   

  	 

	 
	
   

  	
  ARC COMMUNITIES 15 LLC, a Delaware limited

  liability company

  	 

	 
	
   

  	
   

  	 

	 
	
   

  	
   

  	 

	 
	
   

  	
  By:

  	
  /s/ Scott L. Gesell

  	 

	 
	
   

  	
   

  	
  Name:

  	
  Scott L. Gesell

  	 

	 
	
   

  	
   

  	
  Title:

  	
  Vice President

  	 

	 
	
   

  	
   

  	 

	 
	
   

  	
   

  	 

	
   

  	
  ARC15FLOV LLC, a Delaware limited liability

  company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott L. Gesell

  
	
   

  	
   Name:

  	
  Scott L. Gesell

  
	
   

  	
   Title:

  	
  Vice President